Posted by St. Botolph St on February 23, 2003 at 20:43:27:

Hi Brent:

Thanks for explaining that too me. I didn’t realise it was a balloon. I’ll call the seller back to make sure. So, basically you’re making payments like it’s a 30 year loan, but then after ten years, the balance is due.

Help! How do I calculate simple interest? - Posted by St Botolph St

Posted by St Botolph St on February 18, 2003 at 17:29:56:

Hi Everyone, this is embarassing, but I am unsure of the calculation. I spoke with another co-op owner on W. 95th St. It is a “classic 7” room apartment (3BR) between Columbus/Amsterdam. They are asking 915 000, minimum 100 000 down payment, and 5.95% interest for 10 years.

He said something about 815 000 x 5.95% divided by 12 to get a monthly payment but I might not have heard correctly. I was stumbling because I was unsure of everything. I looked at some sites and maybe it is 815 000 x 5.95% x 10yrs all divided by 120 (10 yrs. x 12 months). But then that would be only interest, so wouldn’t it be (815 000 x 5.95% x 10 yrs.) + 815 000 all divided by 120?

However, he also said something like “10 years based on a 30 year payment”–what does that mean? If I call him back, what questions should I ask to clarify?

The maintenance is $1077/mo. and he anticipates an increase of $183/mo. special asessment. They used most of their reserves for a new elevator and want to build it up again.

He would sell for nothing down to the right people. Can i do anything with this? This interest is deductible, as well as half the maintenance, but that doesn’t help me since I don’t have any income. He said most people are in a 40% bracket.

If my calculation is correct, then the monthly payment would be $10 832.71 + $1077 maintenance = $11 909.71 per month! Plus, I’d have to come up with $100 00 down payment. I definitely don’t think it could rent for that much. From 1913-1984 it was a rental, until converted to a co-operative. Those kinds of apartments would not rent for more than $10 000/mo. would they? I haven’t studied this market much, but a brief check of New York Magazine at: http://www.newyorkmetro.com/realestate/articles/02/03/realestate/aptguide/classic6.htm

says Classic Sixes and Sevens go for 1 300 000 - 2 500 000

Re: Help! How do I calculate simple interest? - Posted by Don Dion

Posted by Don Dion on February 19, 2003 at 08:55:14:

Monthly P&I $4836.19 based on $815,000 for 30yrs balance at the end of 120 payments $677,765.05.

If you have the money P&I $6821.61 for the same 120 payments the balance would be $353,276.46 based on 15yr payment’s instead of 30 yr. I ran the figures thru my HP 10B

Re: Help! How do I calculate simple interest? - Posted by GL - ON

Posted by GL - ON on February 18, 2003 at 18:45:22:

The old fashioned way is to look it up in a book of mortgage tables, the modern way is to use a program like Mortgage Wizard. It is very simple and you can download a trial version for free.

Brent did a good job of explaining. The way you were figuring would only be a rough estimate, you need the program to do the calculations correctly.

If you are looking at it as an investment it doesn’t look good.

Re: Help! How do I calculate simple interest? - Posted by Brent_IL

Posted by Brent_IL on February 18, 2003 at 17:48:41:

Were I you, I’d postpone doing deals of this magnitude for a little while.

“10 years based on a 30 year payment” means that the payment on your $815,000 loan (approximately $4,860.17 a month at 5.95% annual interest) is fully amortized over 30 years, but the loan will be called and the balance owed will be due in 10 years. It’s called a balloon payment and must be paid with the 120th mortgage payment.

Local agents may be able to help you with the rental range.

Thank you. I’m getting a different number! - Posted by St. Botolph St

Posted by St. Botolph St on February 23, 2003 at 20:54:50:

Hi Don, thanks. I have a Texas Instruments BA II. However when I put in $815 000 for PV, 5.95% for I, and 360 for N, it computes the payment at $ 5 111.43 per month. What am I doing wrong? I know I shouldn’t enter 120 for N because that brings the payment to $ 10 557.38 per month. I feel like I’m doing something wrong with the calculator. I also have no idea on how to get the balance after 120 payments.

Thanks for running the numbers. I have a financial calculator too, but I’m still learning.