The second example in Appendix K includes monthly advances. In this example the borrower receives monthly advances of $492.51 for 10 years with no lump-sum advance.^{1}

Lump sum to borrower | None | Assume annual dwelling appreciation rate | 8% |

Monthly payments (advances) to borrower | $492.51 | Appraised value of property | $100,000 |

Total loan costs financed | $4,500 | Age of the youngest borrower | 78 |

Contract interest rate | 9% | Estimated loan term | 10 years |

## STEP 1 — CALCULATE FUTURE VALUE OF ALL ADVANCES

### Future Value of All Advances

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

120 months | 0.75% (HP 12c) 9% (HP 17bII) |
$492.51 | ? | |

120 months | 0.75% (HP- 12c) 9% (HP 17bII) |
$4,500 | ? |

I = 9% contract rate divided by 12 months in a year = 0.75%

Using the HP 12c calculator: Set the calculator to BEG MODE (advances are made at the beginning of each month) to calculate the future value of advances, since the first advance is assumed to be made at consummation, not one month after consummation.

Enter the information from above and calculate the FV.

Using HP 17b II calculator: Before entering the information above, make the following entries:

- FIN
- TVM
- OTHER
- BEG (Begin Mode)
- Type 12 and press P/YR to set to 12 P/YR (12 payments per year)
- EXIT

Now the FV can be calculated:

FV (monthly advances) = | $96,022.52 |

FV (total loan costs) = | $11,031.11 + |

FV of all advances = |
$107,053.63 |

## STEP 2 — CALCULATE FUTURE VALUE OF THE DWELLING

**I** = Assumed annual dwelling appreciation rate

### Future Value of the Dwelling

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

10 | 8% | $100,000 | ? |

**With an HP 17bII, the P/YR must be set to 1 (one payment per year).**

FV = $215,892.50

Assuming 7 percent equity reserved:

$215,892.50— $15,112.47 (7 percent of FV of the dwelling) = **$200,780.02**

## STEP 3 — CALCULATE REPAYMENT AMOUNT

The repayment amount is the lesser of the FV of all advances (**$107,053.63**) or the FV of the dwelling minus the equity reserved (**$200,780.02**).

Repayment Amount = $107,053.63

## STEP 4 — CALCULATE THE TALC RATE USING THE APRWIN PROGRAM

Here are the entries for the APRWin program:

Loan Information | |

Amount Financed: |
$492.51(This is the first advance made to the borrower at consummation with 119 monthly advances remaining.) |

Disclosed APR: |
10.87% (If the disclosed TALC rate is being verified, enter the disclosed rate here. If you are calculating the TALC rate enter any estimated rate, e.g., 1) |

Disclosed Finance Charge: |
Leave blank |

Loan Type: |
Installment Loan |

Payment Frequency: |
Monthly |

### Payment Schedule

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 = 10.87% (This is the TALC rate based on the multiple advances to the borrower ($492.51 x 120 = $59,101.20), with $107,053.63 payment at the end of the loan term.)**

- 1 In this example, the unit period (compounding period) is monthly.