[NA]Mortgage calculations[NA]

Let'sgoflying!

Let'sgoflying!

Touchdown! Greaser!
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Dave Taylor
Let's say there is a 15yr 4% note on $40K and the mortgager is supposed to pay, I think it comes to, $295.88 on the 1st of each month. I can use amort .calculators to find the amount applied to P&I with each payment.
Now.....
Ignoring penalties...
Now let's say the payer is making payments of strange amounts at different times instead of the planned amounts & times. Ie, skips a month then pays $400....all over the map.
How does one calculate the cintributions to P&I in these cases?
 
An accounting nightmare. The way you describe it would require a new amortization schedule each month :eek: or just take the difference they send off the principle upon payoff.

Technically, they were late 30 days after the 1st of the month. Never let them go that long before legal notices. You may set a president in a court of law that could jepordize your ability to foreclose.
 
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Sounds like you could come up with an Excel spreadsheet that computes daily interest, and has a column for "add'l principal payment".

A missed payment would lead to slightly increased daily interest until paid. Over- or under-payments would be easy to deal with as well.

It would still be simple at the end of the year to compute actual interest and principal paid for the year by summing columns.

I made a spreadsheet like this (not daily but monthly) because I wanted to see the effect my additional principal payments were having on the date my mortgage would be paid off. I don't recall it being that hard.
 
FastEddieB said:
I made a spreadsheet like this (not daily but monthly) because I wanted to see the effect my additional principal payments were having on the date my mortgage would be paid off. I don't recall it being that hard.
Click to expand...


For one deed of trust. Try a couple of dozen, it is tedious. ;)
 
Let'sgoflying! said:
Let's say there is a 15yr 4% note on $40K and the mortgager is supposed to pay, I think it comes to, $295.88 on the 1st of each month. I can use amort .calculators to find the amount applied to P&I with each payment.
Now.....
Ignoring penalties...
Now let's say the payer is making payments of strange amounts at different times instead of the planned amounts & times. Ie, skips a month then pays $400....all over the map.
How does one calculate the cintributions to P&I in these cases?
Click to expand...


I'd keep it balanced like if they skipped a month then paid $400, I'd show it as last month's full payment and they're in arrears ~$105 on the present month in order to keep the same amortization schedule.

Play catch up so to speak.

But you've got to do something in writing, or else like Geico said you could forfite your ability to claim. If warnings or foreclosure proceedings are not followed, it could look like a gift or something else and then your hosed. The IRS might want their money back too. Mortgages must adhere to strict rules to qualify as interest deductible mortgages. Apologies if you know all this and it isn't relative... :redface:
 
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Let'sgoflying! said:
Let's say there is a 15yr 4% note on $40K and the mortgager is supposed to pay, I think it comes to, $295.88 on the 1st of each month. I can use amort .calculators to find the amount applied to P&I with each payment.
Now.....
Ignoring penalties...
Now let's say the payer is making payments of strange amounts at different times instead of the planned amounts & times. Ie, skips a month then pays $400....all over the map.
How does one calculate the cintributions to P&I in these cases?
Click to expand...

Depends on the loan...if it is simple interest then calc the daily interest charges and apply along with any penalties. Writing the spreadsheet isn't horrible but it does take some time to get everything right with each payment.
 
&@%!# but thanks for the info.
Not thrilled to be spending hours on this. grr.
 
What about this.
Treat the note as payable once a year on Dec 31.
Total all the year's payments as one payment and calculate P&I from that.
Downsides?
 
If I understand you correctly, I believe this puts the buyer at a disadvantage. Every payment reduces the principle, so in turn, reduces the amount of interest for the next day. This is why going to a "bi-monthly" pay schedule pays off(its actually every 2 weeks). The more often you make any type of principal payment, the better.

Simple interest example:

$10,000 loan for one year at 10% annual interest rate. If you wait until day 365 you will need to make $11,000 (or 916.6666 a month)

The same $10,000 @ 10% payed every month is $10,549 total ($879 a month).


DATE PAYMENT PRINCIPAL INTEREST TOTAL INTEREST BALANCE
April 2015 $879.16 $795.83 $83.33 $83.33 $9,204.17
May 2015 $879.16 $802.46 $76.70 $160.03 $8,401.72
June 2015 $879.16 $809.14 $70.01 $230.05 $7,592.57
July 2015 $879.16 $815.89 $63.27 $293.32 $6,776.69
Aug. 2015 $879.16 $822.69 $56.47 $349.79 $5,954.00
Sept. 2015 $879.16 $829.54 $49.62 $399.41 $5,124.46
Oct. 2015 $879.16 $836.46 $42.70 $442.11 $4,288.00
Nov. 2015 $879.16 $843.43 $35.73 $477.85 $3,444.58
Dec. 2015 $879.16 $850.45 $28.70 $506.55 $2,594.12
Jan. 2016 $879.16 $857.54 $21.62 $528.17 $1,736.58
Feb. 2016 $879.16 $864.69 $14.47 $542.64 $871.89
Mar. 2016 $879.16 $871.89 $7.27 $549.91 $0.00

If it is a disadvantage to the buyer, it is an advantage to the seller.
 
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Let'sgoflying! said:
What about this.
Treat the note as payable once a year on Dec 31.
Total all the year's payments as one payment and calculate P&I from that.
Downsides?
Click to expand...

downsides? It's inaccurate (read wrong, incorrect, not-valid, bad, stinks) for a simple interest loan.
 
Let'sgoflying! said:
What about this.
Treat the note as payable once a year on Dec 31.
Total all the year's payments as one payment and calculate P&I from that.
Downsides?
Click to expand...

Not the terms of the original note, again you must follow the terms of the deed of trust or risk having a judge modify it in a judicial proceeding at your expense. You are the one that violated the agreement, however the trustor would have to file suit.

Stick with the terms of the DOT & note.
 
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Let'sgoflying! said:
&@%!# but thanks for the info.
Not thrilled to be spending hours on this. grr.
Click to expand...

I'd do what Fast Eddie said. Simple spreadsheet. They pay late, they pay extra daily interest since the date of their last payment. Does the contract with the mortgagee allow for late payment fees? If so, include those too. Most mortgages are due on the 1st, but not considered late until the 15th.
 
Subsea said:
$10,000 loan for one year at 10% annual interest rate. If you wait until day 365 you will need to make $11,000 (or 916.6666 a month)

The same $10,000 @ 10% payed every month is $10,549 total ($879 a month).

If it is a disadvantage to the buyer, it is an advantage to the seller.
Click to expand...

The other disadvantage here is that if the buyer is having trouble making $295.88/month payments, I wouldn't trust them to make a $3550.56 annual payment on time. The only way I'd do that is if they paid for the year IN ADVANCE.
 
I know, I have a great idea.
I will post all the payment details here and wait til someone does the legwork for me! :D
 
TangoWhiskey said:
The other disadvantage here is that if the buyer is having trouble making $295.88/month payments, I wouldn't trust them to make a $3550.56 annual payment on time. The only way I'd do that is if they paid for the year IN ADVANCE.
Click to expand...

I think he was referring to just the accounting side only. The buyer would still make monthly payments.
 
Let'sgoflying! said:
Let's say there is a 15yr 4% note on $40K and the mortgager is supposed to pay, I think it comes to, $295.88 on the 1st of each month. I can use amort .calculators to find the amount applied to P&I with each payment.
Now.....
Ignoring penalties...
Now let's say the payer is making payments of strange amounts at different times instead of the planned amounts & times. Ie, skips a month then pays $400....all over the map.
How does one calculate the contributions to P&I in these cases?
Click to expand...
The accounting is never easy, but the order in which payment are applied to interest, principal and fees should be part of the loan documents. Typically, that's to interest (including previously unpaid interest) before being applied to principal. You will also often see terms that payments of additional principal do not change the amount of the monthly payment.

Aside from late fees (assuming the note calls for them), payment of less than the scheduled payment may be a default and trigger some lender rights. Might even potentially put the lender in a position to force terms that fix the inconsistent payment problem.

Most importantly, loans, and especially consumer loans, tend to be heavily regulated by the states and state laws in this area can differ a lot.

Probably a good idea to consult with a professional who understands the rules that apply.
 
Each transaction is recorded individually, just as if the correct amount is paid every month. You just cant map it out in a typical amortization schedule.

If extra principal is paid in, the extra is subtracted from the balance.

If you skip a month, you get hit with additional daily interest AND PENALTIES, and you Credit Rating takes a dive. Paying extra next month does nothing to remove the fact you missed a payment previously.
 
Let'sgoflying! said:
What about this.
Treat the note as payable once a year on Dec 31.
Total all the year's payments as one payment and calculate P&I from that.
Downsides?
Click to expand...

That doesn't work. The term (or the payments if the term is fixed) is recalculated every time a principal payment is made, and the timing of the principal payments during the year will affect the remaining balance.
 
Anymouse said:
If you use a spreadsheet, you just record the payment as zero. The interest should continue to accrue.
Click to expand...
Plus penalties; And figure on your next loan costing more because you trashed your credit.
 
Easy excel spreadsheet.

Interest rate / 360 (or 365) = Daily Interest Rate. or 0.000111111% in your case.

Outstanding Balance x Daily Rate 0.000111111% = Daily Interest Charge

Daily Interest Charge x Number of Days since last Payment = Amount applied to Interest.

Payment Made - Amt applied to Interest = Principal Contribution

Outstanding Balance - Principal Contribution = New Outstanding Balance

etc...

etc...

etc...


In Excel, once you get the math to work on dates, pretty simple.


I have quite a few of these we collect, one spreadsheet per loan, and they are easy to input, record, and track.
 
JoseCuervo said:
Easy excel spreadsheet.

Interest rate / 360 (or 365) = Daily Interest Rate. or 0.000111111% in your case.
Click to expand...

Be a little bit careful with that specification for interest rate. It's not a big deal at low rates but the error between it and an APR can be substantial at high interest rates. Of course it isn't a problem if the daily rate is spelled out in the loan.
 
All the accountant types and attorneys hashing it out in here...

How about either pay in full on time or get kicked out ... :dunno:

Would that work? ;)
 
Clark1961 said:
Be a little bit careful with that specification for interest rate. It's not a big deal at low rates but the error between it and an APR can be substantial at high interest rates. Of course it isn't a problem if the daily rate is spelled out in the loan.
Click to expand...


I am willing to risk that his borrower is not sophisticated enough to know the difference.

Although, with all the mortgage reform laws enacted, not sure if that is the case any more.
 
txflyer said:
All the accountant types and attorneys hashing it out in here...

How about either pay in full on time or get kicked out ... :dunno:

Would that work? ;)
Click to expand...



Why would you want to kick somebody out if you are charging them 4% and getting interest, and, perhaps late fees?

Piling up the interest charges is good for lenders.
 
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