Any math whizzes here

Eldon (WA)

Well-known Member
Want to take a stab at this:
I have a land contract out in the amount of $95,377, 25 years @ 6% interest. Payment is 614.52 per month (somehow this varies depending on the program used). Starting with payment #22 (92,338.10 balance), payer added an additional $500 to each payment. What would be the total interest paid for the next 12 months?
 
I always have used the method....anything paid monthly above the due
payment was directly applied to the principle. Therefore, the only
interest incurred would be what was applied to the $614.52 monthly
pymt.
 
(quoted from post at 12:24:13 02/17/17) I always have used the method....anything paid monthly above the due
payment was directly applied to the principle. Therefore, the only
interest incurred would be what was applied to the $614.52 monthly
pymt.

I come up with $5295.19....anyone disagree?
 
Does the contract allow prepayment? You could make a guesstimate based on supposed payment dates, but since the $500 principal payment is not part of the original contract the interest is not usually figured until after the payments are in fact made.
 
I get 5,321.18, with a savings in interest of $167.79. I show the same monthly payment of 614.52, but I have a balance of 92,337.48 instead of your 92,338.10. I have a spreadsheet that I built probably 30 years ago to do the calculations.
 
(quoted from post at 13:06:34 02/17/17) I get 5,321.18, with a savings in interest of $167.79. I show the same monthly payment of 614.52, but I have a balance of 92,337.48 instead of your 92,338.10. I have a spreadsheet that I built probably 30 years ago to do the calculations.

Yes I used a calculator and fat fingers...guess I will go thru it again...
 
(quoted from post at 11:56:22 02/17/17) Want to take a stab at this:
I have a land contract out in the amount of $95,377, 25 years @ 6% interest. Payment is 614.52 per month (somehow this varies depending on the program used). Starting with payment #22 (92,338.10 balance), payer added an additional $500 to each payment. What would be the total interest paid for the next 12 months?

It depends how your contract calculates interest. I calculate daily interest on the unpaid balance for the next period. That means long and short months accumulate different interest.

Using my method, assuming the sale date was 3-1-14 and the first payment was 4-1-14, and you are interested in 2016 payments, my spreadsheet amortizes the loan to be paid off on4-1-39, 25 years so everything checks out. 2016 interest is $5,501.51 and the ending balance for 2016 is $90,478.67. When I add $500 per month to each of 2016 payments the total interest for 2016 is $5,333.46 (a $281 interest reduction from original). And the ending balance is $84,310.62. He paid $6,000 extra and that makes a difference in the interest.

There are lots of ways to calculate interest, like charging the same interest for all of last year. But in my mind it is only fair to drop the interest as the note gets paid off. The old rule of 78's cheated the borrower.

I would be happy to send you my spreadsheet with these numbers if you are comfortable using a spreadsheet.
 
The amount of interest would vary depending on how it's set up. As far as the $500.00 the payer should have sent two checks, one for the normal payment and the other marked "Apply to principle only". I think that is what they intended and if you did that you would have to figure the interest each month separately. If they didn't I think you need at least a CPA if not a lawyer to sort that out.
 
(quoted from post at 14:27:24 02/17/17)
(quoted from post at 11:56:22 02/17/17) Want to take a stab at this:
I have a land contract out in the amount of $95,377, 25 years @ 6% interest. Payment is 614.52 per month (somehow this varies depending on the program used). Starting with payment #22 (92,338.10 balance), payer added an additional $500 to each payment. What would be the total interest paid for the next 12 months?

It depends how your contract calculates interest. I calculate daily interest on the unpaid balance for the next period. That means long and short months accumulate different interest.

Using my method, assuming the sale date was 3-1-14 and the first payment was 4-1-14, and you are interested in 2016 payments, my spreadsheet amortizes the loan to be paid off on4-1-39, 25 years so everything checks out. 2016 interest is $5,501.51 and the ending balance for 2016 is $90,478.67. When I add $500 per month to each of 2016 payments the total interest for 2016 is $5,333.46 (a $281 interest reduction from original). And the ending balance is $84,310.62. He paid $6,000 extra and that makes a difference in the interest.

There are lots of ways to calculate interest, like charging the same interest for all of last year. But in my mind it is only fair to drop the interest as the note gets paid off. The old rule of 78's cheated the borrower.

I would be happy to send you my spreadsheet with these numbers if you are comfortable using a spreadsheet.

When the contract was drawn up I printed out the amortization schedule which appears to compound interest monthly. I think I am stuck with using those figures now. I worked thru the first couple of months and the way I calculated it matched up perfectly...so I think I will continue doing what I am doing. Thanks for the offer, tho.
 
(quoted from post at 14:56:53 02/17/17) The amount of interest would vary depending on how it's set up. As far as the $500.00 the payer should have sent two checks, one for the normal payment and the other marked "Apply to principle only". I think that is what they intended and if you did that you would have to figure the interest each month separately. If they didn't I think you need at least a CPA if not a lawyer to sort that out.

Well it is family, so I don't think we would go that far...
 
(quoted from post at 13:06:34 02/17/17) I get 5,321.18, with a savings in interest of $167.79. I show the same monthly payment of 614.52, but I have a balance of 92,337.48 instead of your 92,338.10. I have a spreadsheet that I built probably 30 years ago to do the calculations.

I was within a few cents the second time thru...that's what I wanted, to check my work. Thanks
 
When I was making extra payments on my van I found an Excel spread sheet on line that allowed entry of an amount above the payment and would adjust the payments left accordingly. This was simple interest but it worked well. Sorry do not have a link, been a while but seem to remember it not taking allot of searching to find it.
 
Off topic, but prepaying a 6% loan doesn't make sense when the stock market is going up the way it is. All those "genius" suggestions to pay off a mortgage early and save interest payments are anything but.
 
Old Retired Banker here. There are several ways that interest is calculated. It could be specified in your contract. Simple monthly interest @ 6% would be 0.5% on the unpaid balance each month. It could also be calculated on a daily basis--360-day year or 365 day year, number of days on unpaid balance X a pre-determined daily factor, (e.g. 0.0001643 for 365 day basis). Fifty-sixty years ago we used the simple monthly formula.
 
That varies from person to person. Many people are not interested in investing in the stock market. Yes, some win, but also some lose--big time. I, personally, choose to be more heavily invested in sound interest-bearing securities than in higher risk investments. Just my conservative nature.
Especially in the case of a contract of conditional sale, many times the debtor simply wants to be free of the contract holder--problems and complications can and do arise in those situations. As quickly as possible get it paid down to a level where a commercial lender can accommodate the debtor is sometimes the most desirable goal.
 
Well you never know how the stock market is going to go or the economy at any rate I want the place I live to be mine period with nothing against it.Peace of mind is worth a whole
lot on my book.
 
The stock market is at an all-time high, a blanket statement that it will only continue to go up is a bit of a Heroic statement.
 
I'm one of those "genius" who believes in zero debt so if it was me that mortgage would be paid off ASAP.
 

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