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

## STEP 1 — CALCULATE FUTURE VALUE OF ALL ADVANCES

### Future Value of All Advances

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

## STEP 2 — CALCULATE FUTURE VALUE OF THE DWELLING

I = Assumed annual dwelling appreciation rate

### Future Value of the Dwelling

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

## STEP 3 — CALCULATE REPAYMENT AMOUNT

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

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

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 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 = 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.)