Free 5 Day Trial »

Register Now »

Basic Uses »

Advanced Uses »

Overview of Tools »

MortgageGraphics has several tools designed for loan and scenario analyses. Please click on the links below for examples and to learn more.

Advanced Analytic Tools, Forecasts, and Analyses

1. Future Economic Loan Value Analysis:   The Future Economic Loan Value Analysis uses the "time value of money" and "opportunity costs" to identify and demonstrate the most economical loan or loan scenario given a client's unique circumstances.

2. Total Return Analysis:   The Total Return Analysis is designed to demonstrate for clients how net worth can be created based on different and varying mortgage products and financing scenarios.

3. Market Implied Future Interest Rates:   Market Implied Future Interest Rates is the forecast of future mortgage index levels and interest rates which is updated daily in the MortgageGraphics online application to calculate adjustable rate mortgage values.

4. Mortgage Index Forecast Report:   The Mortgage Index Forecast Report shows a graph of forecasted future mortgage index levels and includes supporting commentary and quotes designed to educate and inform the client.

5. ARM Scenario Analysis:   Using the ARM Scenario Analysis you can create up to 3 different future interest rate paths and compare the values of a single arm (based on the 3 different interest rate paths) side by side in tables and graphs.

Future Economic Loan Value Analysis

The Future Economic Loan Value Analysis is a measure of loan economics that incorporates tax savings, principal reduction, and correctly assumes that a dollar in hand today is worth more than a dollar in hand 5 years from now because a dollar in hand today can be invested and earn a return ("the time value of money").

The basic premise of the Future Economic Loan Value calculation is that any one time or monthly difference between loans in loan costs and monthly payments, as well as the tax savings of each loan, may be invested at an investment rate estimated by the user. These amounts accrue and compound monthly. The calculation then assumes that these compounded amounts can be applied toward the remaining principal balance of the loan in any given month to determine which loan holds a true, all-inclusive, economic advantage. The loan with the lowest Future Economic Loan Value is the most economical loan.

Click on the links directly below for specific examples of how to use the Future Economic Loan Value Analysis.

• The economics of refinancing
• The economics of varying points and fees with varying interest rate structures

Total Return Analysis

The Total Return Analysis is designed to demonstrate for clients how net worth can be created based on different and varying mortgage products and financing scenarios.

Net worth in this context is defined as equity in the home plus the value of an investment account where the differences between loans in costs, monthly payments, and the tax savings associated with each loan are invested and compounded monthly. This difference in loans might include a scenario where equity is extracted and invested in a savings plan.

NOTE: All financial decisions involve some risk. The financing, purchase, and ownership of a home inherently involves some risk. A financing scenario which leverages the existing equity in a home to make additional investments increases those risks. MortgageGraphics is designed to identify, measure, and manage risks. Any scenario which involves leveraging the value of a home to make addtional investments should be limited to scenarios in which the estimates of investment rates, tax rates, and/or home price appreciation can be made with a great deal of certainty. Therefore, it is suggested that reinvestment rates be limited to the yield on risk free fixed income securities (US Treasury Bonds) held to maturity with a term equal to the client's time horizon. No scenario should be presented to a borrower/client who is not capable of understanding, tolerating, and managing the additional risks that are created when equity is used as financial leverage.

The Total Return Analysis report displays for each loan included in the analysis, five primary loan values at fixed monthly intervals as described below:

• Remaining Principal Balance- The remaining principal balance of the loan.
• Equity- The projected value of the home as determined by annual home price appreciation assumptions estimated by the user minus the remaing principal balance of the loan.
• Future Value of Tax Savings- The value of any tax savings associated with the loan (points and/or mortgage interest) compounded at a tax adjusted reinvestment rate estimated by the user. (Note: any combination of tax savings can be included or excluded from the Analysis.)
• Future Value of Investment Account- The value of the difference between loans in any one-time-costs and/or monthly payments compounded at the tax adjusted reinvestment rate; plus the value of any monies that might have been used to pay toward loan costs but instead are invested at the tax adjusted reinvestment rate because those same loan costs have been rolled into the loan's principal balance.
• The Total Return = Equity + the Future Value of Tax Savings + the Future Value of Investment Account.

Click on the links directly below for specific examples of how to use the Total Return Analysis.

• Minimize a mortgage payment and invest in a savings plan
• Extract equity and invest it in a savings plan

Market Implied Future Interest Rates

Market Implied Future Interest Rates is the forecast of future mortgage index levels and interest rates which is updated daily in the MortgageGraphics online application to calculate adjustable rate mortgage values. This forecast is provided by Perceptive Analytics, Inc. The forecast derived from the current market prices of US Treasury Strips and Euro Dollar Futures, and therefore, reflects the approximate shape of the current "yield curve." Since it is made using the market prices of actively traded securities, it is an unbiased forecast, representing the collective research, knowledge, and opinion of all active market participants.

Click here for a more indepth explanation of the Market Implied Future Interest Rates.

Mortgage Index Forecast Report

One of MortgageGraphics online tools is a Mortgage Index Forecast Report. MortgageGraphics forecasts the future levels of several mortgage indices. These forecasts are based on the Market Implied Future Interest Rates methodology. The Report includes a graph of a selected index or indices followed by an explanation and discussion of the Federal Reserve and the market forces that determine short-term interest rates. The Report also includes a quotes section, which is updated daily with quotes on the future course of interest rates from market experts .

Click here to view an example of the Mortgage Index Forecast Report.

ARM Scenario Analysis

The ARM Scenario Analysis allows the user to create up to 3 different interest rate scenarios for a single adjustable rate mortgage. (This includes negative amortization loans.) The ARM Scenario Analysis shows tables and graphs of interest rates, monthly payments, and principal balances for each of the 3 different scenarios. For example, the monthly payments table and graph show a side by side comparison of the monthly payments of the ARM based on each of the 3 different interest rate scenarios.

Click here to view an example of the ARM Scenario Analysis.