The third example in Appendix K is the combination of a lump-sum advance at consummation and monthly advances after consummation. The borrower receives a lump-sum advance of $10,000 plus the initial monthly payment of $725 at consummation. The borrower will continue to receive $725 per month for the 12-year term of the loan.

Lump sum to borrower | $10,000 | Assume annual dwelling appreciation rate | 8% |

Monthly Payments to borrower | $725 | Appraised value of property | $100,000 |

Total loan costs financed | $4,500 | Age of the youngest borrower | 75 |

Contract interest rate | 8.5% | Estimated loan term | 12 years |

N | I | PV | PMT | FV |
---|---|---|---|---|

144 months | 0.71% (HP 12c) 8.5% (HP 17bII) |
$725 | ? | |

144 months | 0.71% (HP 12c) 8.5% (HP 17bII) |
$14,500 | ? |

N = 12 years x 12 = 144 months

I = 8.5% contract rate divided by 12 months in a year = 0.71%

PV = $10,000 (lump-sum advance) + $4,500 (total loan costs financed) = $14,500

When calculating the future of value of monthly payments, you need to set the calculator to BEG mode (payments made at the beginning of the month).

**For the HP 17bII, the P/YR must be set to 12 (12 payments per year).**

FV ($725 monthly for 12 years) = | $181,751.31 |

FV ($14,500 after 12 years) = | $40,066.99 + |

FV of all advances = | $221,818.30 |

**I** = Assumed annual dwelling appreciation rate

N | I | PV | FV |
---|---|---|---|

12 | 8% | $100,000 | ? |

**For the HP 17bII calculator, the P/YR must be reset to 1 (one payment per year).**

FV = $251,817.01

Assuming 7 percent equity reserved:

$251,817.01— $17,627.19 (7% of FV of the dwelling) = **$234,189.82**

The repayment amount is the lesser of the FV of all advances ($221,818.30) or the FV of the dwelling minus the equity reserved ($234,189.82).

Repayment Amount = $221,818.30

Here are the entries for the APRWin program:

Loan Information | |

Amount Financed: |
$10,725 (Lump sum + first monthly advance) |

Disclosed APR: |
9.25% (If the disclosed TALC rate is being verified, enter the disclosed rate here. If the TALC rate is being calculated, enter any estimated value, e.g., 1.) |

Disclosed Finance Charge: |
Leave blank |

Loan Type: | Installment Loan |

Payment Frequency: | Monthly |

Payment Stream #1 — **Payment Amount should be entered as a negative value.** The number of payments is the remaining number of advances left after the initial advance at consummation.

Payment Stream #2 — Payment Amount is the amount from step 3.

**APR = 9.25% (This is the TALC rate based on the multiple advances to the borrower ($725 x 144 = $104,400), $10,000 initial advance, and $221,818.30 payment.)**