Ah, sweet serendipity.
No sooner did my wife and I start looking for a new home, with all the befuddling financial calculations pertaining thereto, than a nifty little program called SolveIt came through the door.
Actually, using SolveIt to do home mortgage calculations is sort of like buying a Ferrari to commute five miles to your job.
This $90 gem from Pine Grove Software of Forest Hills, N.Y. will solve 30 different kinds of financial problems, ranging from basic home budgeting to complex weighted averaging of sales, depreciation tables and calculations of economic ordering quantities.
All you have to do is select the kind of problem you want to solve and fill in the blanks on your screen. You can solve even more complex problems -- such as how much you need to save for retirement at a specified income level (with inflation figured in before and after you retire) by combining two or more of SolveIt's functions.
True, you can solve most of these problems if you're good enough with Lotus 1-2-3 or own a good Hewlett-Packard financial calculator. But SolveIt makes it so easy that it's hardly worth the bother to use anything else.
SolveIt will run on any IBM-compatible machine with 512K of memory. It's a big program, so you'll need a hard disk or a floppy drive with at least 720K of storage. The program doesn't use graphics, so it doesn't matter what kind of monitor or video board you have.
When you run SolveIt, you see a menu that divides the program's functions into eight categories: finance, loan analysis, depreciation, general business, real estate, net worth and budget.
The finance functions include the meat and potatoes of money calculations, including present and future values, net present value (with positive or negative cash flows), annuity payouts or time to withdrawal, the regular payment required to reach a future sum at various interest rates, and a comparison of different interest rates using different compounding periods.
As a simple example, let's say you figure on replacing your car in three years, and you'll need a $10,000 down payment. By using the payment required function, SolveIt will tell you that you'll need to save $250.44 per month at 7 percent interest (compounded monthly) to meet the goal.
If you don't understand the terms, SolveIt will explain them through its extensive on-line help or its clearly written manual. The manual includes real-life examples for each function, which makes some of the more complex problems understandable even if you don't have a degree in accounting.
The manual also warns you about the pitfalls of certain calculations, such as the fallacies of internal rate of return formulas in investments that produce widely fluctuating cash flows.
SolveIt offers a variety of loan analysis functions, including the standard calculation of monthly payments, balloon payments, interest due between dates and amortization tables.
What makes these functions stand out is the program's ability to take into account extra payments toward principal -- an increasingly popular method of saving on interest and reducing the length of a loan without incurring financial hardship.
For example, you have a $75,000, 25-year mortgage at 9.5 percent. If you stick to the schedule, you'll pay $121,584 in interest.
But you figure that you'll be able to afford an extra $100 a month after three years. If you apply that amount toward principal, you'll pay off the mortgage in 18 years and save $36,541 in interest.
You can figure all this just by filling in a form. SolveIt even allows you to enter extra payments of varying amounts on a month-by-month basis.
For accountants and business people, SolveIt includes both straight line and accelerated cost recovery system depreciation formulas (complete with IRS definitions). It will also calculate gross profits on a series of transactions as well as economic ordering quantities for purchasing goods.
In its real estate section, the program will help you determine how affordable a home is, given your income, expenses and available cash. It will perform a detailed analysis of rental income, taking into account mortgages, expenses, rental increases, depreciation and your tax bracket.
The program also will help determine your net worth and set up monthly family budgets.
I do have a couple of quarrels with SolveIt. Its use of the cursor and tab keys in moving between data entry fields is occasionally inconsistent. It also had trouble reading the signals from my laser printer. It didn't recognize when a printout was complete (also, it was easy to regain control of the program by hitting the escape key).
But these are quibbles. SolveIt is solid, utilitarian software that can solve simple and complex problems for business operators, business students and home users with no hassles.