4235.1 REV-1

Appendix 21

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

HOME EQUITY CONVERSION MORTGAGE

Using an HP12C to Calculate Payments to Borrowers

This appendix illustrates use of an HP12C for calculating

payments to borrowers under the Home Equity Conversion Mortgage
Insurance

program. For simplicity, the examples assume a 75 year old borrower in a

\$100,000 house with either a 10 percent interest rate and no servicing
fee

or a 9.5 percent interest rate and a \$12 servicing fee.

Screen

You Enter Keystrokes Displays

Determining the \_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Principal Limit

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Clear register. \[f\] \[REG\] 0.000

Enter principal limit .416 \[ENTER\] .416

factor from table in

Appendix 16 for 75 year

old borrower and 10

percent interest rate.

Multiply by maximum 100,000 \[x\] 41,600.000

claim amount.

Calculating Tenure

Payments

Clear register. \[f\] \[REG\] 0.000

Set calculator for \[g\] \[BEG\] 0.000

payments at beginning

of period.

Enter principal limit. 41,600 \[ENTER\] 41,600.000

Subtract initial 3,500 \[-\] 38,100.000

payments\--e.g., \$2,000

mortgage insurance

premium (MIP) and

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Page 1 of 12

4235.1 REV-1 Appendix 21

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\$1,500 closing costs.

Enter net principal \[PV\] 38,100.000

limit.

Enter expected rate. 10 \[ENTER\] 10.000

Add periodic MIP .5 \[+\] 10.500

to calculate

compounding rate.

Enter monthly \[g\] \[i\] .875

compounding rate.

Calculate years until 100 \[ENTER\] 100.000

borrower turns 100.

Subtract age of 75 \[-\] 25.000

youngest borrower

rounded to nearest

whole year.

Enter term in \[g\] \[n\] 300.000

months.

Calculate future \[FV\] -519,983.179

value of principal

limit.

Prepare to calculate 0 \[PV\] 0.000

monthly payments.

Calculate monthly \[PMT\] 356.613

tenure payment.

Calculating Term

Payments

Clear register. \[f\] \[REG\] 0.000

Set calculator for \[g\] \[BEG\] 0.000

payments at beginning

of period.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Page 2 of 12

Appendix 21 4235.1 REV-1

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Enter principal limit. 41,600 \[ENTER\] 41,600.000

Subtract initial payment 3,500 \[-\] 38,100.000

\--e.g., \$2,000

mortgage insurance

premium (MIP) and

\$1,500 closing costs.

Enter net principal \[PV\] 38,100.000

limit.

Enter monthly 10.5 \[g\] \[i\] .875

compounding rate.

Enter term (10 years). 10 \[g\] \[n\] 120.000

Calculate future \[FV\] -108,380.389

value of principal

limit.

Prepare to calculate 0 \[PV\] 0.000

monthly payments.

Calculate monthly \[PMT\] 509.643

term payment.

Calculating Tenure Payment

With Monthly Servicing Charge

Set-Aside

Clear register. \[f\] \[REG\] 0.000

Set calculator for \[g\] \[BEG\] 0.000

payments at beginning

of period.

Enter monthly 12 \[PMT\] 12.000

servicing charge.

Enter compounding 10 \[g\] \[i\] .833

rate (9.5% + .5%).

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Page 3 of 12

4235.1 REV-1 Appendix 21

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Enter term 25 \[g\] \[n\] 300.000

(100 - 75).

Calculate \[PV\] -1,331.571

servicing fee

set-aside.

Add principal limit. 44,300 \[+\] 42,968.429

(.443 x 100,000)

Subtract initial 3,500 \[-\] 39,468.429

payments (\$2,000

+\$1,500).

Enter net principal \[PV\] 39,468.429

limit.

Prepare to calculate 0 \[PMT\] 0.000

monthly payments.

Calculate future \[FV\] -475,868.673

value of principal

limit.

Prepare to calculate 0 \[PV\] 0.000

monthly payments.

Calculate monthly \[PMT\] 355.686

tenure payment.

Calculating Term Payment

With Initial Draw and

Line of Credit Set-Aside

Clear register. \[f\] \[REG\] 0.000

Set calculator for \[g\] \[BEG\] 0.000

payments at beginning

of period.

Enter principal limit. 41,600 \[ENTER\] 41,600.000

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Page 4 of 12

Appendix 21 4235.1 REV-1

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Subtract initial payment 3,500 \[-\] 38,100.000

\--e.g., \$2,000

mortgage insurance

premium (MIP) and

\$1,500 closing costs.

Subtract initial draw. 5,000 \[-\] 33,100.000

Subtract line of credit 2,000 \[-\] 31,100.000

set-aside.

Enter net principal \[PV\] 31,100.000

limit.

Enter monthly 10.5 \[g\] \[i\] .875

compounding rate.

Enter term (10 years). 10 \[g\] \[n\] 120.000

Calculate future \[FV\] -88,467.981

value of principal

limit.

Prepare to calculate 0 \[PV\] 0.000

monthly payments.

Calculate monthly \[PMT\] 416.008

term payment.

Change in Payment Plan

After 60 Months From

Line of Credit to

7-Year Term (Assumes

\$5,000 Initial Draw and

Financing of Closing Costs)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Page 5 of 12

4235.1 REV-1 Appendix 21

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Clear register. \[f\] \[REG\] 0.000

Set calculator for \[g\] \[BEG\] 0.000

payments at beginning

of period.

Enter principal limit. 41,600 \[ENTER\] 41,600.000

Subtract initial payment 3,500 \[-\] 38,100.000

\--e.g., \$2,000

mortgage insurance

premium (MIP) and

\$1,500 closing costs.

Subtract initial draw. 5,000 \[-\] 33,100.000

Enter net principal \[PV\] 33,100.000

limits.

Enter monthly 10.5 \[g\] \[i\] .875

compounding rate.

Enter lapsed months. 60 \[n\] 60.000

Calculate future \[FV\] -55,826.559

value of principal

limit.

Prepare to calculate \[CHS\] 55,826.559

net principal limit.

Enter initial mortgage 8,500 \[PV\] 8,500.000

balance (3,500 + 5,000).

Calculate current \[FV\] -14,336.125

mortgage balance.

Calculate net \[+\] 41,490.433

principal limit.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Page 6 of 12

Appendix 21 4235.1 REV-1

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Enter net principal \[PV\] 41,490.433

limit.

Enter term (7 years). 7 \[g\] \[n\] 84.000

Calculate future \[FV\] -86,251.365

value of principal

limit.

Prepare to calculate 0 \[PV\] 0.000

monthly payments.

Calculate monthly \[PMT\] 693.489

term payment.

Change in Payment Plan

After 36 Months From

Tenure to 8-Year Term

Clear register. \[f\] \[REG\] 0.000

Set calculator for \[g\] \[BEG\] 0.000

payments at beginning

of period.

Enter principal limit. 41,600 \[ENTER\] 41,600.000

Subtract initial payment 3,500 \[-\] 38,100.000

\--e.g., \$2,000

mortgage insurance

premium (MIP) and

\$1,500 closing costs.

Enter net principal \[PV\] 33,100.000

limit.

Enter monthly 10.5 \[g\] \[i\] .875

compounding rate.

Enter initial term. 25 \[g\] \[n\] 300.000

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Page 7 of 12

4235.1 REV-1 Appendix 21

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Calculate future \[FV\] -519,983.179

value of principal

limit.

Prepare to calculate 0 \[PV\] 0.000

monthly payments.

Calculate monthly \[PMT\] 356.613

tenure payment.

Prepare to calculate 3,500 \[PV\] 3,500.000

mortgage balance:

Enter initial payments

(\$2,000 + \$1,500).

Enter lapsed months. 36 \[n\] 36.000

Calculate current \[FV\] -19,934.451

mortgage balance.

Prepare to calculate 0 \[PMT\] 0.000

principal limit.

Enter initial 41,600 \[PV\] 41,600.000

principal limit.

Calculate current \[FV\] -56,924.739

principal limit.

Prepare to calculate \[CHS\] 56,924.739

net principal limit.

Calculate net \[+\] 36,990.288

principal limit.

Enter net principal \[PV\] 36,990.288

limit.

Enter term (8 years). 8 \[g\] \[n\] 96.000

Calculate future \[FV\] -85,370.593

value of principal

limit.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Page 8 of 12

Appendix 21 4235.1 REV-1

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Prepare to calculate 0 \[PV\] 0.000

monthly payment.

Calculate monthly \[PMT\] 566.177

term payment.

Change in Payment Plan

After 48 Months

From 10-Year Term with

Service Fee to 14-Year

Term

Clear register. \[f\] \[REG\] 0.000

Set calculator for \[g\] \[BEG\] 0.000

payments at beginning

of period.

Enter monthly 12 \[PMT\] 12.000

servicing charge.

Enter compounding 10 \[g\] \[i\] .833

rate (9.5% + .5%).

Enter term 25 \[g\] \[n\] 300.000

(100 - 75).

Calculate \[PV\] -1,331.571

servicing fee

set-aside.

Add principal limit. 44,300 \[+\] 42,968.429

(.443 x 100,000)

Subtract initial 3,500 \[-\] 39,468.429

payments (\$2,000

\+ \$1,500).

Enter net principal \[PV\] 39,468.429

limit.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Page 9 of 12

4235.1 REV-1 Appendix 21

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Prepare to calculate \[PMT\] 0.000

monthly payments.

Enter initial term. 10 \[g\]\[n\] 120.000

Calculate future \[FV\] -106,842.674

value of principal

limit.

Prepare to calculate 0 \[PV\] 0.000

monthly payments.

Calculate monthly \[PMT\] 517.268

term payment.

Add monthly 12 \[+\] 529.268

service fee.

Enter total \[PMT\] 529.268

monthly payment.

Enter initial 3,500 \[PV\] 3,500.000

payments (\$2,000

\+ \$1,500).

Enter lapsed months. 48 \[n\] 48.000

Calculate current \[FV\] -36,551.653

mortgage balance.

Enter initial 44,300 \[PV\] 44,300.000

principal limit.

Prepare to calculate 0 \[PMT\] 0.000

current principal

limit.

Calculate current \[FV\] -65,978.387

principal limit.

Prepare to calculate \[CHS\] 65,978.387

net principal limit.

Calculate net \[+\] 29,426.734

principal limit.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Page 10 of 12

Appendix 21 4235.1 REV-1

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Store net principal \[STO\] \[1\] 29,426.734

limit.

Clear entries. \[g\] \[FIN\] 0.000

Recalculate 12 \[PMT\] 12.000

servicing set-aside.

Enter compounding 10 \[g\] \[i\] .833

rate.

Enter original term 300 \[ENTER\] 300.000

of set-aside.

Subtract lapsed months. 48 \[-\] 252.000

Enter new term of \[n\] 252.000

set-aside.

Calculate servicing \[PV\] -1,272.639

set-aside.

Recall net principal \[RCL\] \[1\] 29,426.734

limit.

Add net principal \[+\] 28,154.095

limit.

Enter net principal \[PV\] 28,154.095

limit.

Prepare to calculate 0 \[PMT\] 0.000

monthly payment.

Enter new term. 14 \[g\] \[n\] 168.000

Calculate future \[FV\] -113,510.085

value of principal

limit.

Prepare to calculate 0 \[PV\] 0.000

monthly payment.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Page 11 of 12

4235.1 REV-1 Appendix 21

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Calculate monthly \[PMT\] 309.426

payment.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Page 12 of 12