Real Estate Question: how to automate a financial model

[jayandkimber]

How would you automate a financial model for this scenario? Explain or show us your work.


A loan that was 3 years interest only, then converted to a fully amortizing loan for 5 years with principal paydowns of $3,000 that were occurring throughout the whole time?


Principal: $500,000 Interest only: 4%Term: 3 Years Paydowns: $3000 (meaning that $3,000 additionally is being paid toward the principal each month)


Fully Amortizing Interest: 7%Term: 5 years Paydowns: $3000 (meaning that $3,000 additionally is being paid toward the principal each month)

 

[stapel]

How would you automate a financial model for this scenario?

What does your textbook (or instructor) mean by "automating a model"? What are your thoughts on this?

A loan that was 3 years interest only, then converted to a fully amortizing loan for 5 years with principal paydowns of $3,000 that were occurring throughout the whole time?

Principal: $500,000 Interest only: 4%Term: 3 Years Paydowns: $3000 (meaning that $3,000 additionally is being paid toward the principal each month)

Fully Amortizing Interest: 7%Term: 5 years Paydowns: $3000 (meaning that $3,000 additionally is being paid toward the principal each month)

All of the above is one "scenario"? What are your thoughts on this?

When you reply, please include a clear listing of your efforts so far, so we can see where you're getting stuck. Thank you!

 

[JeffM]

How would you automate a financial model for this scenario? Explain or show us your work.


A loan that was 3 years interest only, then converted to a fully amortizing loan for 5 years with principal paydowns of $3,000 that were occurring throughout the whole time?


Principal: $500,000 Interest only: 4%Term: 3 Years Paydowns: $3000 (meaning that $3,000 additionally is being paid toward the principal each month)


Fully Amortizing Interest: 7%Term: 5 years Paydowns: $3000 (meaning that $3,000 additionally is being paid toward the principal each month)

This does not make sense at all.

An interest-only loan that has payments of principal would be a loan that is not interest-only.

Interest only means that the only payments due are those for on-going interest.

Fully amortizing means that equal payments are due each month that are just sufficient to pay off interest due each month while reducing principal so that at the end of the term there is no principal remaining.

Is what you mean that for the initial three year term of a loan of 500,000, the monthly payment is interest at a 4% annual percentage rate plus 3000 dollars in reduction of principal, and that for the following five years the principal balance remaining is amortized in equal installments at a 7% annual percentage rate.

And as stapel asks, what do you mean by automated? Are they by any chance asking you to show payments per month and a monthly breakdown between reduction of principal and payment of interest using something like Excel?