A wraparound mortgage is a combination of refinancing a mortgage and borrowing against real estate equity. Usually the two unknown quantities in the wrapped mortgage are the new payment and the rate of return to the lender. To arrive at a solution, use both the TVM and the cash flow applications.
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HP 10bii Calculator  Cash Flow Examples
Calculator symbol key
The procedures in this document use the following text to represent symbol keys:
Key

Description

Text Representation


colored key; shift key

SHIFT

Example of calculating a wrap around mortgage
There are 82 monthly payments of $754 left on an 8 percent mortgage, leaving a remaining balance of $47,510.22. It is desirable to wrap that mortgage and borrow an additional $35,000 for another investment. A lender is willing to "wrap" an $82,510.22 mortgage at 9.5 percent for 15 years. What are the new payments and what return is the lender getting on this wraparound mortgage?
The payment calculation is a straightforward TVM payment calculation using the new amount as the PV.
Set to END mode. Press SHIFT, then BEG/END if BEGIN annunciator is displayed.
Keys

Display

Description

Press SHIFT, then C ALL

0.00

Clears all registers

Press 12, SHIFT, then P/YR

12.00

Sets payments per year

Press 82510, [.], 22, then PV

82,510.22

Stores loan amount on which your new payment is calculated

Press 9, [.], 5, then I/YR

9.50

Stores interest rate

Press 0, then FV

0.00

Stores final balance

Press 15, SHIFT, then xP/YR

180.00

Stores number of monthly payments

Press PMT

861.59

Calculates the payment

Then, to calculate the lender's return, enter cash flows that represent the complete picture of the wraparound mortgage from the lender's point of view.
When the cash flows are grouped:
CF0 = 47,510.22  82,510.22 = 35,000
CF1 = 861.59  754.00 = 107.59
N1 = 82
CF2 = 861.59
N2 = 180  82 = 98
Keys:

Display

Description

Press 35000, [+/], then CFj

CF
35,000.00

Enters $35,000 for loan amount

Press RCL, PMT, [+/], [], 754, then CFj

CF
107.59

Enters net payments for first 82 months

Press 82, SHIFT, then Nj

N
82.00

Enters number of times payment occurs

Press RCL, PMT, [+/], then CFj

CF
861.59

Enters net payment for next 98 months

Press 180, [], 82, SHIFT, then Nj

N
98.00

Enters number of times payment occurs

Press SHIFT, then IRR/YR

10.16

Calculates annual return

Net future value
The net future value can be calculated by using the TVM keys to slide the net present value (NPV) forward on the cash flow diagram.
Example of calculating net future value
Deposits have been made over the last two years into a money market fund earning 8.8 percent. What is the current balance of the account?
Set to END mode. Press SHIFT, then BEG/END if BEGIN annunciator is displayed.
Keys

Display

Description

Press SHIFT, then C ALL

Clears all registers


Press 12, SHIFT, then P/YR

12.00

Sets payments per year

Press 12000, [+/], then CFj

CF
12,000.00

Enters initial cash flow

Press 0, then CFj

CF
0.00

Enters amount in group 1

Press 2, SHIFT, then Nj

N
2.00

Enters number of times payment occurs

Press 3000, [+/], then CFj

CF
3,000.00

Enters amount in group 2

Press 3, SHIFT, then Nj

N
3.00

Enters number of times payment occurs

Press 0, CFj, 9, SHIFT, then Nj

N
9.00

Enters number of times payment occurs

Press 7500, [+/], then CFj

CF
7,500.00

Enters cash flow group 4

Press 0, CFj, 3, SHIFT, then Nj

N
3.00

Enters number of times payment occurs

Press 2000, [+/], then CFj

CF
2,000.00

Enters cash flow group 6

Press 8, [.], 8, then I/YR

8.80

Stores annual interest rate

Press SHIFT, then NPV

29,203.14

Calculates net present value (NPV)

Press 24, then N

24.00

Stores known values

Press 0, then PMT

0.00
 
Press FV

34,800.58

Calculates net future value

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