# What is the NPV test?

## What is the NPV test?

The NPV test compares the value of a dollar today with the value of a dollar in the future, taking into account inflation and returns. NPV tests are used by servicers in the loan modification context because they want to compare the FMV of the property today to the present value of the modified mortgage.

**What is NPV in mortgage modification?**

The Net Present Value Test (NPV) is a calculation which indicates how much a loan as an investment is worth today. Mortgage investors will compare what a mortgage is worth today with what a mortgage is worth after a modification. If the NPV is negative, the investor does not have to modify the mortgage.

**Is the FHA HAMP program still available?**

Current Status: Active.

### How do I qualify for a HAMP loan modification?

The program’s requirements include:

- Demonstrating your ability to pay the mortgage and not go back into default.
- Making at least 12 monthly payments since your mortgage closing.
- Not having any loan modifications in the past three years.
- Not having more than three loan modifications since your mortgage closing.

**Why is NPV important?**

One, NPV considers the time value of money, translating future cash flows into today’s dollars. Two, it provides a concrete number that managers can use to easily compare an initial outlay of cash against the present value of the return.

**How do I calculate future value?**

The future value formula

- future value = present value x (1+ interest rate)n Condensed into math lingo, the formula looks like this:
- FV=PV(1+i)n In this formula, the superscript n refers to the number of interest-compounding periods that will occur during the time period you’re calculating for.
- FV = $1,000 x (1 + 0.1)5

## How do you calculate NPV for refinance?

Step 3: Subtract the PV of the balance difference from the PV of the payment differences to calculate the net present value of refinancing. The NPV of refinancing to the 30-year rate is therefore $66,573 – $43,597 = $22,976.

**Do you include loans in NPV?**

It does not. In only includes principal repayments. Cash Flows from Operating Activities does include interest payments.

**How can I qualify for FHA HAMP modification?**

You must have had the pre-modification FHA loan for at least 12 months before qualifying. If you’ve had the loan for only 12 months, you must have made at least 4 payments on it. The loan must be in default or imminent default, in which a missed payment is reasonably foreseeable.

### Is a high NPV good?

A positive NPV indicates that the projected earnings generated by a project or investment—in present dollars—exceeds the anticipated costs, also in present dollars. It is assumed that an investment with a positive NPV will be profitable. An investment with a negative NPV will result in a net loss.