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U
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APR and Total Finance Charges
Calculating the Annual Percentage Rate (APR) and Total Finance
Charges (TFC) is performed in two steps: (1) you set up the loan
just like any other problem (that is, enter three known variables and
solve for the fourth) and (2) combine points and fees and press s
ˆ (APR) to solve APR. If you continue to press ˆ, the calculator
will also display the total finance charges, and a third press will dis-
play total finance charges plus principal (total cost of loan).
If mortgage insurance is entered, as seen in the second example,
your calculator will include that expense into APR and total finance
charges, as well as calculate the periodic mortgage insurance dollar
amount and PIMI (Principal, Interest, Mortgage Insurance) payment.
Note: APR for non-real estate loans (such as for autos and boats) that compound
interest based upon 365 days per year cannot not be solved using this function, as
calculations are based on 360 days per year.
Finding APR, Total Finance Charges (Excluding Mortgage
Insurance)
You are financing a mortgage of $250,000 for 30 years at a nominal
or quoted rate of 8% interest. The cost of getting the loan is quoted
as 1.5 points and $550 in fees. Mortgage insurance is not required.
What is the APR and total finance charges when these costs are
included?
STEPS KEYSTROKES DISPLAY
Clear calculator o o 0.00
Enter loan amount 2 5 0 ) l 250,000.00
Enter interest 8 ˆ 8.00
Enter term 3 0 T 30.00
Find monthly P&I payment p “run” 1,834.41
Find Loan Costs:
Recall loan amount ® l 250,000.00
Find point cost x 1 • 5 % = 3,750.00
Add fees and find total + 5 5 0 = 4,300.00
Find APR* s ˆ “run” 8.18
Find total finance charges ˆ 414,688.12
Find amount financed ˆ 245,700.00
Find total finance charges
plus amount financed ˆ 660,388.12
*Note: Because APR is an interest calculation, it may take several seconds to calculate.
APR includes mortgage insurance, if entered. Total finance charges include mortgage
insurance over the life of the loan, to present a worst-case scenario; however, most
people can eliminate MI once a certain LTV is met.
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