A mortgage has a face value of $45,000. The interest is to be 12% with semi-annual compounding, not in advance. The loan is to be repaid in three years. No payments of principal or interest are to be made during the three years. At the end of the three years all the outstanding principal and interest will be repaid in one payment. The total cost of all the fees is $3,500 and thus the borrower is actually receiving only $41,500 because the broker is getting his $3,500.

A financial calculator could be used for this calculation, .. providing you know how to calculate the “12 % semi-annual compounding, monthly interest factor” which is 0.009758794179192. This factor is required to calculate the Future value (FV) of $45,000 in 36 months. One of the unique features of MORTGAGE2 PRO software is its ability to do PV/FV calculations without requiring you to understand how to calculate this interest factor, 0.009758794179192.

1.. You make the MORTGAGE2 PRO amortization schedule a negative amortization schedule by making all the payments equal to zero for the first 36 months. The balance at 36 months is the Future Value of $45,000 growing at 12% per year semi-annually compounded, which is $63,833.35 What you have is a series of FV results in a grid format from one month to 36 months which is more informative than the regular PV/FV financial calculator format.