Contents of the LOANPLAN.DOC file
| LOAN PLANNER |
| v. 1.0 |
copyright 1986, 1987 by Clay Carr
What Have We Here?
Loan-Planner is a loan computation program. It's been
developed to work with mortgages, but is adaptable to any kind of
Like most loan computation programs, Loan-Planner will
compute any one of the following variables, if given the other
three: the amount of the loan, the interest rate, the number of
payments, or the amount of the payment. It will also print an
amortization table to the screen or the printer. The printed
version will total interest and principal payments for each year.
So far, ho hum. But it does something more. If you enter
the information on a current loan and then enter the same
information for a proposed loan, Loan-Planner will compute
(1) The estimated payback period (the point at which you
begin to get a positive cash flow from refinancing), if there is
(2) The total estimated saving (or loss) from refinancing;
(3) The impact on equity (after 2 and 5 years) of the
This, as they say, ain't chopped liver!
Before we get into a description of the program, you should
be aware of three things:
First, this is essentially a beta test version. I've
debugged it as thoroughly as I can--but I found long ago that the
author is never as good at finding bugs as someone else. Please
treat as a test version, not the final product. If you find a
bug, I'd very much appreciate your writing me at the my E-Mail
Loan Planner, page 1
address or the address on the title screen of the program and
describing it to me. I'll make sure that you get a version of
the program with the bug removed as quickly as I can get it
Second - and this is another negative - please don't take
the results of the payback computations as gospel (you can take
the amortization as gospel, if you want). I've tested the
formulas and analyzed them, and I think they're accurate. If you
use them to compare two loans and then want to take action based
on the results, though, please verify your results in some other
Third - money! I wrote this program to be useful to people,
and my first concern is for it to be used. If you use it
occasionally for your own benefit, please enjoy it with my
blessings. If you use it regularly, particularly in your
business, I'd very much appreciate your sending $15 to become a
registered user - since I think it will be worth at least that
much to you. If you want to see just how it works, and perhaps
customize it for yourself, add an extra $5 and I'll send you the
Turbo Pascal (c) source code on disk.
How Does It Work?
(1) Computing a Variable on a Loan: Almost all programs of
this kind work the same way: you enter three of the variables
(amount, interest, number of payments, payment amount) and it
computes the fourth.
To access this feature, hit L (caps or lower case) at the
Main Menu. Loan-Planner will prompt you for each entry and then
print the value of the computed variable. (Because of the nature
of the formula, a computed amount may be off a fraction of a
percentage point; all other computed variables should be exact.)
After the variable is computed and displayed, you'll be
given a variety of options. Two of them are to print an
amortization table to the screen or the printer. The table
identifies the amount of each payment that goes to interest and
principle, as well as the balance of the loan after the payment.
If you just want a table for one or a few years, the easiest
way is to print the table to the screen (which is done one year
at a time) and do a PrtSc for each year desired.
(2) Computing the Payback Period. While it's important to
know just how much refinancing a loan will save you over all,
Loan Planner, page 2
this isn't always the most important information. If you don't
intend to keep the house (boat, lot, etc.) for the entire period
of the loan, you may be much more interested in knowing how long
it will take you to get your money back if you refinance. This
portion of Loan-Planner - selected by hitting P at the Main Menu
- will do just that.
When you select Payback, you'll be prompted for three of the
four loan variables (just as in the first computation program).
You'll also be prompted for the number of payments that have been
made on the existing loan - since this impacts both the amount of
a refinanced loan and its payback period. You can always enter a
zero if you've not made any payments or don't want to take
account of them.
When Loan-Planner calculates the final variable for the
existing loan, it will also calculate and display the remaining
balance on the loan. This is exact, and is derived from the
amortization tables. ALL REMAINING COMPUTATIONS ARE ESTIMATES,
AND SHOULD BE TREATED AS SUCH.
You will now be prompted for the same information (except
payments made) on the proposed loan. You will also be asked for
three more items:
(a) The points required to get the new loan, including
any loan origination fee expressed in points;
(b) The other costs of the loan - usually called
"out-of-pocket costs" if they are for a mortgage. These
costs are entered as dollar amounts, not percentages.
(c) Your estimate of the after-tax interest you would
expect to make if any cash gained or foregone were invested in an
appropriate manner. This is a very rough estimate, but it's
factored into all of the subsequent calculations to allow for the
impact of interest made or foregone. Of course, you can ignore
this impact by entering a zero here.
When you've entered all the requested data, Loan-Planner
will compute three separate sets of data and display them for
(a) The payback period - that is, the point at which
your savings from the new loan offset the extra costs incurred to
obtain the loan. If you will not gain back the costs of the
loan, this is noted too. The information is displayed on the
first result screen.
(b) The overall gain or loss from refinancing, if you
continue to own the home (or other asset) for the full loan
period. This is displayed at the top of the second screen.
(c) The amount of increase or decrease in your equity
in the asset at the end of the 2nd and 5th years of the new loan.
These time periods were chosen, somewhat arbitrarily, because
they give you information for the near term, if you're thinking
of selling the asset after a short while, and also give you an
idea of the trend.
Loan Planner, page 3
All three items of information are shown because the
relationship between them can be very different for different
loans. It's quite possible to have an early payback period by
refinancing but at the same time to lose money if you hold the
asset for the term of the loan - or vice versa. While either of
these is occurring, you can be gaining or losing equity by
refinancing. Whether refinancing is attractive depends on the
combination of all three factors - and your estimate of the
period of time for which you will hold the asset.
That's All Folks....
At least I think it is. You should find Loan-Planner easy
to use, and I hope its results are easy to interpret. If you use
it and have suggestions, please let me know. Thanks.
342 E. Schrock Road
Westerville, OH 43081