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* M I - A N A L Y S T *
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A Mortgage Investor's Forecasting Tool
for Personal Financial Analysis

Version 1.10 1986
.Page00
TABLE OF CONTENTS

Page

Introduction......................................... 1

Overview............................................. 2

Mortgages section.................................... 3
Points
Amortizations
Direct Reduction
Early Payback
Bi-Weekly Payback

Financial section.................................... 5
Main Bank Account
Auxiliary Account
Long Term Savings
Itemized Account
Equity and Net Worth
Real Estate Value
Tax Brackets

Forecast section..................................... 8
Speculation Menu
Switches Menu
Forecast Menu

Getting Started..................................... 12
System Requirements
Working Copy
Loading Program
Screen Colors
Entering Data

Examples............................................ 14
Retirement Planning
Mortgages and Investments
Refinancing

Distribution/Registration............................ 19
.Page00
INTRODUCTION



Financial planing can be confusing. This is partly due to
the volume of information and advice now available on the
subject. Faced with overwhelming and sometimes contradictory
information the important consideration becomes how to choose
one investment strategy over another. Answers to many
financial questions depend ultimately on individual needs,
goals and financial details. MI-ANALYST is a mortgage and
investment planning tool which uses this information to help
make decisions on personal investment strategies in a simple
and uncomplicated way.


It will show how a change in interest rates, inflation rates,
annual salary, or appreciation of Real Estate affects
financial planning. Comparisons of various savings plans or
methods of equity accumulation can easily be made. Questions
concerning whether a mortgage should be paid off early,
refinanced, or extra money placed in a savings plan can also
be answered. This is accomplished by allowing a direct
comparison between financial outcomes from various scenarios
using yearly net worth to quantify differences. Each
component of net worth can similarly be evaluated. The effect
of tax brackets and itemizing on income taxes can also
readily be taken into account.


For some individuals, an important goal is accumulation of
equity. MI-ANALYST will show exactly how equity is
accumulated under various situations. Amortizations can be
specifically taylored to an individual's needs and goals.
Although it will be of most benefit in cases where a mortgage
is a significant portion of the financial picture, valuable
information on investing and financial planning will also be
provided when no mortgage is present. Within this context the
intent is to provide a framework for testing financial
scenarios to prevent one from falling prey to unsound
investment practices.
.Page 1
OVERVIEW


The program is divided into three sections. The first is
concerned with mortgages (or loans) and amortizations. Once
mortgage details have been specified, the amortization may be
repeated in various ways to show the length of time it takes
to pay off a loan and how much of a penalty is paid through
interest.

In the second section the period of financial concern is
defined and details of a financial plan are considered. These
are restricted to items which are either known or can be
estimated with confidence at the beginning of the period of
concern. They include monthly income, monthly expenses,
miscellaneous transactions, savings plans, interest rates,
itemizing options on income taxes, Real Estate market value,
and tax brackets.

Section three allows speculation on matters which are largely
unknown or not under an individuals direct control throughout
the period of concern. These include annual income, interest
rates, inflation rates and appreciation of Real Estate using
a graphical approach which is both quick and easy to use. In
addition speculative effects may be limited in scope to
specific items where appropriate. The aim is to provide
flexibility in developing financial scenarios for the focus
of this section which is financial prediction. Having set
forth a scenario based on the first two sections and the
speculative options of this section, a financial forecast is
made for each year within the period of concern. Once
completed, other forecasts using different amortizations,
speculative options and/or financial plans may be easily
carried out for purposes of comparison.

Within the mortgage section amortization details may be
listed to the screen or printer. In addition a summary of the
mortgage details may be similarly listed. After the financial
forecast has been completed a summary of the financial plan
and economic scenario may also be listed.

Before using this program please read the "GETTING STARTED"
section of this manual-especially the part on entering data.
.Page 2
MORTGAGE SECTION


Within this section all details pertinent to mortgages are
specified. These include the amount of money borrowed, the
fixed interest rate and number of points (if any), the
period of the loan in years (fractional years are allowed)
and the date when the first mortgage payment is to be made.

POINTS: When interest rates are low and mortgage money is
scarce, borrower's points are sometimes required. This is a
method of effectively increasing the interest rate without
explicitly stating so. Each point refers to one percent of
the amount borrowed. As far as monthly payments are concerned
a rule of thumb is that every point translates into roughly
one eighth percent increase in mortgage interest rate. For
example: a $50000 mortgage at 9% with 4 points for 30 years
means that in order to qualify for the 9% rate, 4% of $50000
(=$2000) must be paid. This $2000 can either be paid up front
(out of one's bank account) or borrowed by adding to the
$50000 mortgage. If the later is chosen the monthly payment
would be close in value to the monthly payment involved in
borrowing $50000 at 9.5% for 30 years.

AMORTIZATION: Defined as the reduction of principal (amount
borrowed) of a loan by regular payments which include
interest payments and possibly other loan costs. The program
produces amortization schedules which consist of the payment
number, date, amount of payment, principal and interest parts
of the payment, total interest paid to date, and outstanding
principal. The payments are usually monthly but bi-weekly
payments (described below) are also possible. Amortizations
can be made in the following ways:

DIRECT REDUCTION: This is the standard amortization used by
lending institutions for fixed rate mortgages. Each monthly
payment is a fixed amount. Part of it is used to reduce the
outstanding principal and the remainder is used for interest
on the loan. When the principal has been reduced to zero the
mortgage is paid off. The total interest paid is the cost of
borrowing money. Part of this cost may be regained by
itemizing as described later in the financial section.
.Page 3
MORTGAGE SECTION


EARLY PAYBACK: These methods add extra amounts to reduce the
outstanding principal in various ways. The net effect is that
equity (that part of the Real Estate which is actually owned)
is accumulated more quickly. Most lending institutions allow
early payoffs without incurring extra fees. If fees are
incurred, they can be accounted for as described in the
financial section. One method of early payback is to double
the principal part of each monthly payment. Since the
principal part of the monthly payment changes in time, the
monthly payments will no longer be fixed. In fact they will
always increase with time. Another method is to periodically
add a constant amount to the original monthly payment. This
can be every month, every third month or at whatever interval
is decided upon. The last method is to add lump sum payments
at certain times. Any or all of these methods may be used at
different times during the mortgage period to provide maximum
flexibility in personalizing a payback plan. Those interested
in accumulation of Equity will find this particularly useful.

BI-WEEKLY: This plan is relatively new and as of yet is not
supported by many lending institutions. The idea is to take
the monthly payment from the direct reduction method, divide
it in half then pay this amount every two weeks. Mortgage
terms are shorter than with the direct reduction plan because
there are 26 instead of 24 payments per year.

As described above the mortgage may be paid off in a variety
of ways. The method chosen affects the total interest paid
out, the number of payments made and the money saved if the
option to itemize on income taxes is chosen. Once completed,
different amortizations can easily be explored or entirely
new mortgages chosen. After completing the mortgage section,
opportunity is given to set up an individualized financial
plan. This topic is discussed in the following section.
.Page 4
FINANCIAL SECTION


The period of financial concern must be defined first. It may
be anytime between year 1965 and year 2031. The current date
or whenever balances from financial accounts can be estimated
is a logical place to begin. If there is a mortgage the
period of concern may begin on or after the date of the first
payment. It will always end on the date when the mortgage was
originally scheduled to be paid off. This is the case even if
the chosen amortization plan reduces the original mortgage
term. The accounting is done through a double entry system
involving four accounts which may generate income: the main
bank account, an auxiliary account, a long term savings
account, and an itemized account. The interest rate for each
must be specified at the beginning of the period of concern.

MAIN BANK ACCOUNT: This is open throughout the period of
concern and may represent a regular bank account, money
market, or any combination of accounts from which
transactions are routinely made. These include monthly
deposits of income, monthly withdrawals for expenses
(electricity, heating, phone, ...etc) and regular deposits
into a long term savings plan or auxiliary account.
Miscellaneous transactions in the form of deposits or
withdrawals are also allowed. They may be made once or
periodically every so many months up to a year apart. For
instance: Fees or penalties for specific items may be paid
once. Property taxes may be paid once per year, water bills
quarterly, and insurance premiums every six months throughout
the period of concern. In addition to interest rate the
opening balance must also be specified. Depending on the
details of the amortization, withdrawals for mortgage
payments will automatically be made at the appropriate times.

AUXILIARY ACCOUNT: This is a special account reserved for
keeping track of "would be" mortgage payments if a mortgage
happens to be paid off early. Immediately following the early
pay off date the account is opened and monthly deposits are
allowed. The account remains open for the remainder of the
period of concern and it may be specified as tax free. More
on that in the forecasting section.
.Page 5
FINANCIAL SECTION


LONG TERM SAVINGS ACCOUNT: This may be defined for any time
within the period of concern and may represent stocks, bonds,
IRA's or any form of long term savings. The initial balance
and interest rate must be specified as well as the deposit or
withdrawal plan. In a fashion similar to that used in the
main bank account, transactions may be made periodically.
That is to say monthly, every so many months or up to once
per year. The amount used for the transaction may be
specified in one of two ways; it may be a fixed amount or a
percentage of monthly income. If the later method is chosen
only deposits into the account are allowed. If income changes
with time (see speculative option) then the amount changes
accordingly.The account may be specified as having tax free
status (described later). If the deposit plan ends before the
end or the period of concern, the account remains open and
interest bearing.

ITEMIZED ACCOUNT: This is specifically for handling tax
savings realized by itemizing mortgage interest on the
federal income tax return. Provision is also allowed for
monthly or miscellaneous expenses (property taxes...etc) which
can be itemized and are in addition to the amount necessary
to meet the zero bracket (The zero bracket refers to the
amount of itemized deductions necessary before tax savings
can be realized). It is further assumed that the necessary
witholdings from income (one for each dependent plus the
house plus whatever else is appropriate) are taken so as to
give zero tax refund or balance due on the tax return at the
end of the year. The money saved by itemizing as described
above is distributed in equal monthly amounts into the
itemized account. The account remains open and interest
bearing throughout the period of concern even if the mortgage
is payed off early.

EQUITY and NET WORTH: In addition to the accounts described
above, two other amounts are tabulated. For the purposes of
this program, equity is considered to be that portion of the
Real Estate which is actually owned. Net worth is the dollar
value of the equity plus the four interest bearing accounts
described above.
.Page 6
FINANCIAL SECTION


If a mortgage exists then the market value of the Real
Estate at the beginning of the period of concern must be
estimated. How this may change throughout the period of
concern is discussed in the speculative section. Lastly,the
tax bracket needs to be specified. The loss of revenue
through taxes is determined by the tax bracket. A 20% bracket
means that 20% of all income above the taxable amount goes to
Uncle Sam. It also means that 20 % of all itemized deductions
above the zero bracket amount are refunded. These savings are
applied to the itemized account as previously described.

A double entry system is used for all transactions. The only
exception is monthly and miscellaneous expenses. This money
is withdrawn from the main bank account and is considered
lost unless it is declared for itemizing purposes on income
taxes. Depending on the tax bracket a portion of that which
is itemized (including mortgage interest) will end up in the
itemized account. Mortgage payments are deducted
automatically from the main bank account. Long term savings
deposits are withdrawn from the main bank account. Similarly,
withdrawals from the long term savings end up in the main
bank account. Deposits into the auxiliary account are
withdrawn from the main bank account. If either the main bank
account or the long term savings account is overdrawn the
program will stop and print the date on which it occurs. This
is useful when it is desirable to know how long withdrawals
can be made from an interest generating account.

One important and often overlooked consideration in the
question of whether to pay off a mortgage early or put money
into a savings account is the following: When money is placed
in a savings account the best of intentions may fade with
time and some of that money may occasionally be spent. One
way to look at this is that the effective interest rate for
the savings is lower than its advertized value. On the other
hand, money used to pay off a amortgage early is forced
savings at a known interest rate and it can't be squandered.
The disadvantage is that the money is not easily available in
the event of an emergency.
.Page 7
FORECASTING SECTION


At this point all quantities which can be estimated with
confidence have been considered. Future values of income,
interest rates, inflation, and Real Estate appreciation or
depreciation are generally known with less certainty. Within
this program any increase in the dollar value of Real Estate
above that caused by inflation is appreciation. Examples
would be additions,improvements, or being located within an
actively growing area. Similiarly, any reduction in the
dollar value below inflation is depreciation. An example
would be undesirable elements moving into the neighborhood or
finding out that the empty lot next door was the former site
of a toxic waste dump.

Useful information can be arrived at by devising scenarios
based on present trends or best estimates of future values.
To aid flexibility in designing scenarios a graphical
approach (described below) is used to specify estimates of
each on a yearly basis throughout the period of concern. To
further increase design flexibility an option is allowed for
selectively limiting the scope of speculations where
appropriate. After the financial scenario has been designed a
prediction can be made for balances on all accounts plus
equity and net worth at the end of each year within the
period of concern. Once completed a summary of the scenario
and prediction may be listed to the printer. Opportunity is
then given to choose different amortizations, new speculative
options, alternative financial plans or a different mortgage.

SPECULATIVE MENU: The average yearly income, interest rates,
inflation and Real Estate appreciation may vary from year to
year during the period of concern. By choosing the
speculative menu this variation may be quickly and easily
changed to reflect best estimates of future trends. If not
then all speculative quantities remain initialized to zero
and have no effect on the forecast. Options within this menu
allow all speculative items to be initialized to zero,
modified, saved to disk, or retrieved from disk. Filenames
with up to eight characters are allowed for saving the
speculations;however, extensions are not allowed on
filenames. Of course a filename must first be saved before it
can be retrieved. This allows for a library of speculative
scenarios to be maintained on disk.
.Page 8
FORECASTING SECTION


As an example consider annual income which has been specified
as a monthly value in the financial section. Suppose it is
desirable to speculate that annual income increases or
decreases in some manner during the period of concern. This
might be due to expected pay raises, a spouse starting or
ending work, or perhaps retirement. Simply select the modify
option in the speculative menu. A plot of annual adjustments
which will be applied to the initial annual income will
appear on the screen. Also a flashing prompt will appear
whose value in dollars will be shown along the vertical axis
for the year shown along the horizontal axis. For instance,
if the value of the flashing prompt is $2000 then the value
of the yearly income that year is $2000 added to the initial
yearly income implied by the financial section.

According to the options along the bottom of the screen it is
possible to increase or decrease the value of the flashing
prompt by using the cursor up or cursor down keys. Pressing
the cursor right or cursor left keys will move the flashing
prompt to the right or left thereby selecting a different
year. By using these cursor keys adjustments can be made to
the initial income for any year during the period of concern.
A word about other options: Pressing L will set the value of
the flashing prompt equal to the value immediately to its
left; pressing N will move on to the next plot which is for
interest rates. The adjustments for annual interest rates
work in a similar fashion. They are made by adding the
plotted values to the initial interest rates as specified in
the financial section. The third plot is for yearly inflation

rates. These are the actual yearly rates as opposed to the
adjustment character of the income and interest rates. Lastly
there is a plot for annual appreciation or depreciation of
Real Estate. Again this is an actual yearly rate and does not
have to be added to anything. Pressing N again will re-display
the first plot; pressing X will exit back to the speculation
menu.
.Page 9
FORECASTING SECTION


When speculating on interest rates it is possible to
inadvertently specify a negative interest rate if the
speculation is for a drop in rates which is greater than the
initial rate on an account. If this happens the program will
stop and a message will be printed. The same applies to
speculation on annual income.

Incremental changes for interest rates, inflation rates, and
appreciation are defaulted to 1 % and the incremental change
for annual income is defaulted to $1000. Choosing the
initializing option allows these defaults to be changed. For
instance the default value for changes in annual income may
be increased to a limit of $10000; simply select it and press
I to increase the value or D to decrease it. Defaulted
increments for interest rates, inflation rates and Real
Estate appreciation rates may be changed in a similar manner.
However, once set they cannot be changed without initializing
all speculative values back to zero.

Exiting this menu will get back to the financial forecasting
menu. Limiting the scope of the speculations will be
discussed next.

SWITCHES MENU: It is sometimes desirable to selectively
switch off the effect of speculation on certain items while
retaining it on others. If speculation is switched off on an
item then it retains its original value throughout the period
of concern. Consider inflation: It potentially affects the
dollar value of Real Estate, monthly expenses and
miscellaneous expenses. Suppose however that miscellaneous
expenses remain fixed with time while monthly expenses
continue to grow with inflation (When inflation is active on
miscellaneous expenses, the initial value of each expense
remains unaltered). The switches menu provides a quick way of
selectively limiting the scope of the speculative inflation
to monthly expenses. Similarly the scope of speculative
interest rates may also be limited to selective accounts.
Speculative appreciation affects only Real Estate and
speculative income affects only income.
.Page10
FORECASTING SECTION


In addition the tax status of the long term savings plan and
the auxiliary account are controlled by this menu. Each may
be specified as tax free or taxable independent of the other.
All switches may be toggled on or off by repeatedly pressing
the key which references them.

When listing the financial summary the scope of all
speculative options will be shown next to the items affected.
If the speculation is inactivated for a specific item it will
be indicated as such in the summary. A table of yearly
speculative values for annual income, interest rates,
inflation rates and appreciation rates will also be given.

FORECASTING: Having set forth a scenario based on all that
has been described previously, the financial forecast is
ready to proceed. All specified transactions including
automatic mortgage payments will take place on the 1st day of
the month (except for Bi-weekly amortizations) where
applicable and interest will be compounded daily for the
actual number of days in each month. At the end of the year
taxes will be levied after which account balances, equity and
net worth will be calculated. (Net worth is the sum of equity
and all other accounts) Speculations on annual income,
interest rates, inflation and appreciation will be
incorporated at the appropriate times subject to limitations
imposed by "switches" for each year during the period of
financial concern. Sit back, relax and watch the financial
future unfold. When finished all results may be summarized
and listed to a printer. At this point the scenario may be
modified and a new forecast produced.

When comparing different investment plans be sure to look at
the results year by year. How long is one likely to stick to
an investment plan? What happens if the plan is disrupted
before completion? Also look for large differences when
comparing strategies. A few thousand dollars difference over
thirty years is not significant if the amounts involved are
in the hundreds of thousands of dollars.
.Page11
GETTING STARTED


REQUIREMENTS: The program requires at least 128K of RAM with
DOS 2.0 or greater on an IBM PC or compatible including the
PCjr. It also requires one disk drive. A printer is
recommended but not required. Both color and monochrome
boards are supported. When using monochrome the highlighting
will work but the color options will not. Be sure to adjust
the contrast on the monochrome screen to make the
highlighting stand out.

WORKING COPY: Boot the system with DOS 2.0 or greater
according to recommended procedures. Format a new diskette
with the DOS command shown in brackets:{FORMAT B:/S}. Place

MI-ANALYST in drive A and enter the DOS command shown in
brackets:{COPY A:*.* B:}. Put the original version in a safe
place and do not put a write protect tab over the working
copy.

LOADING: Insert the working copy into drive A, type ANALYST
then press return. LEAVE THE DISKETTE IN DRIVE A BECAUSE IT
WILL BE REQUIRED AR VARIOUS TIMES! Momentarily the menu will
appear. There will be four options at this point: one to
change screen colors, a second to define the financial
scenario, a third to print this manual and a fourth to return
to DOS.

SCREEN COLORS: This menu allows different combinations of
foreground and background colors to suit personal taste.
An option is given to save the selected color information on
disk so it will be in effect on subsequent executions of the
program. If the save option is not chosen then the default
remains white foreground on black background.
.Page12
GETTING STARTED


ENTERING INFORMATION: In all cases the allowable limits of
response will be indicated. Whether a key is to be pressed or
a value is to be entered with the ENTER key will also be
indicated. Pressing or entering the letter B ,where
indicated, will allow one to back up to a previous point.
However, backing up over a previously set item erases its
value. When selecting the option to change a financial plan
from the forecast section, control is passed to the end of
the financial section. Using the backup feature will allow
the desired location to be reached. Experience has shown this
to be quicker than entering the financial section from the
beginning since the most frequently changed items appear near
the end.

Using $ or % is not allowed when entering numbers. Months are
numbered from one to twelve. The first three letters of a
month or its complete form may also be used. March, Mar and 3
are all equivalent. An incorrect response will give a beep.
In the graphical section a beep means an attempt was made to
move the flashing prompt outside allowable limits. When
listing summaries to screen or printer, the ESC key may be
used to cancel the listing of the amortizaton tables or
yearly forecast balances. The pause key may be used to
momentarily stop the scroll when listing to the screen. The
only graceful way of exiting the program is through one of
the menu options for returning to DOS.

The following section will show some examples of how the
program can be used. The examples are kept simple to promote
understanding and are by no means meant to exhaust
possibilities for application. Once familiarity with the
program is gained exploration using more complicated
scenarios is encouraged. Sometimes complicated scenarios need
to be broken into a series of simpler ones - each of which
can be solved separately. It is generally helpful to have a
clear idea of what is intended before executing the program.
Stream of consciousness decision making is useful but not a
substitute for well thought out planning.
.Page13
EXAMPLES


RETIREMENT PLANNING: Consider the following scenario (For
simplicity assume no mortgage). John's monthly take home
income is $2100 and he is in the 25% tax bracket. On Dec 1st,
1985 he deposits $2000 into one of his savings accounts
earning 10% interest. He continues this deposit once every
December through the year 2001. The deposited money is
intended to generate interest throughout retirement which
starts after Dec 30th,2005. Starting on Jan 1st,2006 he
expects to be in the 15% tax bracket and withdraw $1000 per
month from the account. How long can he expect to make these
withdrawals?


Solution: Start by following directions in the "Loading"
section of this manual. When the menu appears select the
option to define a scenario. Answer N for No to the mortgage
question, then define the period of financial concern from
Dec,1985 to Dec,2005. Set the initial bank balance to zero,
enter the $2100 monthly salary with no monthly expenses,
miscellaneous transactions or interest. Answer Yes to the
long term savings plan question. The savings deposit plan is
not for the entire period of concern so answer No to the next
question and specify the deposit plan from Dec,1985 to
Dec,2001. Enter a zero initial balance. Since the plan is
based on depositing a fixed amount answer No to the next
question. Periodically deposit $2000 at an interval of 12
months using a 10% interest rate with no initial balance on
this account. Answer No to the itemization option and enter a
tax bracket of 25%. Select the forecast option. Momentarily a
summary of the financial plan and yearly balances will be
generated. When completed list the summary to a printer if
available.

Notice the messages stating that speculation is active on
certain items: the value of these items changes from year to
year according to the economic speculation table. However,
since the speculative option in the financial section had not
been chosen, speculations retain their zero initialized
values as can be seen by inspecting the printed table. These
tabulated values can be changed from within the speculative
menu and their scope (active or inactive) can be limited from
within the switches menu.
.Page14
EXAMPLES


The ending balance under the long term savings column is what
the savings is worth after taxes prior to retirement. The
main bank account shows the deposited income less what went
into the savings. Net worth is the sum of both.

To find out how long the savings lasts, choose the option to
begin over from the forecast menu and set the period of
concern from Jan,2006 to Dec,2031. Specify no monthly income,
monthly expenses, miscellaneous transactions, starting
balance or interest for the main bank account. Open the long
term savings account for the same period and specify the
initial balance from the previous ending balance of the long
term savings. For the withdrawal plan specify minus $1000 to
signify a withdrawal and set the interval to one month (The
money will be placed into the main bank account). Keep the
interest rate at 10% for this account and set the tax bracket
to 15%. If the account is overdrawn the date will be
displayed. The last entry under the main bank account column
shows how much money was withdrawn from the savings.

As an aid to gaining further familiarity with the program one
might try to answer the following:

How would results change if...

A) The savings account was taxfree? (IRA)

B) Starting on Jan 1,1985 the deposits were made monthly?
($166 per month)

C) Instead of deposits being fixed they were defined as a
percentage of the monthly income and the income changed in
various ways due to bonuses, layoffs ...etc?

D) Part or all of the savings could be itemized?

E) Recession or inflation forced interest rates to change?
(Specify the details according to an educated guess.)
.PAGE15
EXAMPLES


MORTGAGE/INVESTMENT: Starting on June 1st,1983 the Farlows
began payments on a $50000 mortgage at 12.5% for 30 years.
Their combined monthly income was $2400. They are in the 25%
tax bracket and get an average of 6% on their savings (see
last paragraph in the financial section). On Sept 1st,1986
the market value of their house was $85000.

A) How much interest will be paid out over the 30 years?

B) How much is saved by itemizing mortgage interest?

On Sept 1st,1986 they have $10000 and are considering whether
or not to pay off the mortgage early.

C) If they decide to keep the money in their savings starting
Sept 1st,1986 what will be their yearly net worth be?

D) If they make a lump sum payment of $10000 against their
outstanding principal on Sept 1st,1986 when can they expect
the mortgage to be payed off? How much interest will be
saved? What will their yearly net worth be?

E) Suppose instead they decide to bank the $10000 and draw
off $200 per month to add to their monthly mortgage payments
starting Sept 1st,1986. How does this affect the mortgage
payoff date and yearly net worth ?

Solution: Choose the option to define a scenario and answer
Yes to the mortgage question. Enter the date, amount,
interest rate (with no points) and mortgage term. Select the
direct reduction method of amortizing and the answer to A
will be shown. List the amortization schedule and summary to
the screen or printer (use ESC key to cancel the listing if
desired). Proceed to the financial section. Start the period
of financial concern on Sept 1st,1986. It will automatically
end during the year when the original mortgage is scheduled
to be paid off. Specify an initial balance of zero and a
monthly salary of $2400 with no monthly expenses or
transactions (for simplicity). Set the interest rate to 6%
for the main bank account and do not open a long term savings
account.Answer Yes to the itemizing question.
.Page16
EXAMPLES


The mortgage interest will be itemized automatically but
don't specify any additional deductions. Specify a 6%
interest rate for the itemized account. Enter the market
value of the house and the tax bracket. This finishes the
financial planning section. Select the forecast option and
the financial and speculative summary along with the
prediction will be given.

Speculation on salary,interest rates,inflation rates and
appreciation are listed in a table for each year of concern.
Since no speculation has been called for all items are zero
except for the salary which remains constant. Note the
financial summary shows which items are sensitive to the
specualtion. List the summary to a printer if available. The
equity column contains the amount actually owned at the end
of each year. The itemized account shows the savings balance
achieved by investing the money realized form itemizing the
mortgage interest at the specified interest rate. This
answers part B.

To answer part C modify the current scenario by selecting the
option for a different financial plan from the forecast menu.
Use B to backup to the point where details for the main bank
account are specified. Set the initial balance to $10000 and
proceed as before. The $10000 could have been deposited into
the long term savings, however leaving it in the main bank
account is a convienient set up for answering part D.

The current scenario is still in effect. Changing the
amortization to withdraw the $10000 from the main bank
account is all that is required to answer part D. To
accomplish this take the amortization option from the
forecast menu and select the Early Payoff method. Answer No
to the questions on doubling principal and periodic payments
and Yes to the question on lump sum payments. Enter $10000 on
Sept 1st,1986. The date when the mortgage will be paid off
will be shown after all questions have been answered. The
amortization schedule can be listed for comparison with
previous results. After the mortgage is paid off early put
the "would be" monthly mortgage payment into the auxiliary
account at 6%. Proceed to the forecast option and momentarily
the prediction will be given.
.Page17
EXAMPLES


To answer part E it must first be determined how often the
$200 monthly withdrawal can be made. Return to the beginning
and specify No mortgage. Set the period of financial concern
the same as in part B. Start the main bank account with
$10000 initial balance at 6% interest and a monthly expense
of $200. Set the monthly income and transactions to zero. Do
not open a savings account and do not itemize. Enter the tax
bracket and proceed with the prediction. The date when the
main bank account is overdrawn will be shown. Therefore
withdrawals can be made through the previous month. Armed
with this information start from the beginning, specify the
mortgage details and take the periodic payment plan (under
the early payback method) for amortizing. Enter $200, the
starting and ending dates and an interval of one month
between periodic payments. Also do not open a long term
savings plan in the financial section. Instead, initialize
the starting balance of the main bank account with $10000 at
6%. Keep everything else as before. Proceed with the forecast
and the summary of results can be compared with the one from
part C.

REFINANCING: When interest rates drop it may be advantageous
to refinance for the lower interest rate. Having gone through
the previous mortgage example it should be clear how to
investigate refinancing of a mortgage. First generate the
scenario involving the present mortgage. Then generate the
scenario involving the new mortgage to compare yearly
balances on accounts. To cover the cost of refinancing,
certain fees are involved. They can be included as a one time
special expense or the amount of the new mortgage can be
increased to cover them. If points are involved read the last
part of the mortgage section. Different refinancing plans can
readily be evaluated for the most advantageous one.

An alternative to refinancing is recasting. The advantage of
recasting is that fees are significantly less than with
refinancing. The catch is that, in order to qualify, the
mortgage must be held by the original lender at the time of
recasting. If it has been sold to another financial
institution recasting is not allowable. If mortgage rates
drop one should definitely consider recasting. Ask the
lending institution for details.
.Page18
DISTRIBUTION / REGISTRATION


This program (MI-ANALYST Version 1.10) is distributed through
the shareware concept. It may be copied and shared freely.
Selling copies for profit is not allowed. The suggested
contribution for its use is the paltry sum of $20 ( if in
addition to registration one would like to receive the latest
version with manual on disk enclose an extra $5 to cover the
cost of duplication and handling). Please send to:

Ronald C. Pacanowski
7 Lawndale Rd.
Yardley, PA. 19067


Registration will help keep the price of future software
reasonable. Please fill out the following:

Name __________________________________ Date ________

Street __________________________________

City/State __________________________________

Zip code_______

Comments or suggestions:

_________________________________________________________

_________________________________________________________

__________________________________________________________

DISCLAIMER: Before committing to an investment plan of any
sort always seek advice from a professional financial
manager. The author has tried in good faith to provide an
error free mortgage and investment planning tool. His
responsibility for errors in the program is limited solely to
correcting them in future releases. If an error is found the
author would be grateful if details would be submitted to the
above address.
.Page19


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