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From: daver@hp-pcd.UUCP (daver)
Newsgroups: net.consumers
Subject: Re: Semi-monthly mortgage repayments
Message-ID: <26400003@hpcvrd.UUCP>
Date: Mon, 18-Nov-85 20:21:00 EST
Article-I.D.: hpcvrd.26400003
Posted: Mon Nov 18 20:21:00 1985
Date-Received: Sat, 7-Dec-85 21:06:29 EST
References: <1389@decwrl.UUCP>
Organization: Hewlett-Packard - Corvallis, OR
Lines: 39
Nf-ID: #R:decwrl:-138900:hpcvrd:26400003:000:1419
Nf-From: hpcvrd!daver    Nov 18 17:21:00 1985

I tried a sample problem on my calculator (an HP-41CX with the Advantage ROM
for Time-Value-of-Money calculations) and it seems to work.  The problem I
computed was a $50,000 loan at 12% APR with monthly payments for 30 years:

	    PV = 50,000  (present value of loan - money received at start)
	    FV =      0  (future value of loan - money to be received at end)
	    N  =    360  (number of payments)
	    I  =    1.0  (interest % per payment at 12 payments/year)

     yields PMT=-514.31  (money received per payment period - i.e. -payment)

If we go biweekly, with 26 payments per year, each half the present payment,
the new interest rate per payment is 12/26 or 0.462... (all calculations are
carried to 10 digits), and the new payment is -514.31/2 or -257.15:

	    I  =   0.46  
	    PMT=-257.15

     yields N  =    494  (total payments)
       with FV =-120.36  (final balance after 494th payment - negative means
			  money flows away from borrower)

494 payments at 26 payments/year works out to 19 years.  Total money paid on
the loan is:

     case 1:  514.31 * 360 =          $185,150.27
     case 2:  257.15 * 494 + 120.36 = $127,154.02
				      -----------
				      $ 57,996.25  total saved

Annual payments come out to 

     case 1:  514.31 * 12 = $6171.68
     case 2:  257.15 * 26 = $6685.98

A good calculator makes it easy to answer questions like this.

Dave Rabinowitz
hplabs!hp-pcd!daver