Municipal Loans often offer a unique structure that combines both interest-only payments every 6th month and annual fixed principal plus interest payments.
Using TValue, this is actually pretty easy to structure. Both of these types of payments are options in the Special Series function. The challenge is that these two different payments are on different payment cycles.
Let’s do a case study with a loan of $1 million dollars for 10 years at 6% with the two different payment streams every six months.
Since we will have payments twice per year, we will use Semiannual for the Compounding Period. The Nominal Annual Rate is 6%. The Loan Amount is $1 million.
Under this deal structure, we have interest only payments after six months. On line 2, the Payment will default to six months after the Loan. For the Amount, click on Special Series and then select Interest Only. For the Number, enter 10 and then select Annual for the Period. This will create 10 annual interest-only payments.
On line 3, you need to enter the annual Fixed Principal Plus Interest payments. First, adjust the Date to one year after the Loan. When TValue alerts you that “Your cash flow dates are out of sequence.”, click OK. TValue will then sort the cash flows for you chronologically. For the Amount, click on Special Series and then select Fixed Principal Plus Interest. For the Number, enter 10 and then select Annual for the Period. For the Principal Payment Amount, input 100,000. Then click Calculate.
When TValue alerts you that “Your cash flow dates are out of sequence." again, click OK. TValue will sort the payments so that you have an Interest Only payment and then a Fixed Principal payment for 10 years.
The amortization schedule will show the payment schedule and the amortization of the loan for each year.
If you have any questions using TValue, please feel free to give our Support Team a call at 800-426-4741 or email support@TimeValue.com.