Posted by Andy Martin on February 17, 2017 at 13:27:24 from (209.213.149.120):
In Reply to: Any math whizzes here posted by Eldon (WA) on February 17, 2017 at 10:56:22:
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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.
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