Formula for a buy down rate calculator

**venkcris** · 02-10-2014, 02:00 PM

Hi,

I need help in creating a formula to make a Rate buy down calculator and need your help.
My requirement for Example:

Loan Amount $25,000
Custom rate is 5%
Term of Loan is 5 years
Amortization is 5 years
Buy down rate say 1.00
Payment frequency is Monthly

I would like to know the cost of buy down from 5% to 1%

**alansidman** · 02-10-2014, 02:26 PM

I used a the CUMIPMT function which is part of analysis pack. See attached

**venkcris** · 02-10-2014, 02:58 PM

Thanks for the formula and quick responce. I had a similar calculator from an institution and they have their buy down payment at $2354.77. Not sure how they got that figure. Any help on this is highly appreciated.

**alansidman** · 02-10-2014, 03:05 PM

Without seeing the logic that the other organization provided, I am at a loss.

**venkcris** · 02-10-2014, 03:17 PM

I cannot send the original excel document due to privacy reasons. However sending here with their calculation on a Excel. Not sure if they are using reducing balance or a fixed payment type.

**alansidman** · 02-10-2014, 04:07 PM

There are no formulas in the workbook to analyze. I suggest you ask them the logic they used to calculate the buy down to ensure its veracity. In my solution, I have calculated How much you would pay at 5% and how much you would pay at 1% and the buy down is the difference.