loan/mortgage repayment via sched xactions: feedback request

Derek Atkins warlord@MIT.EDU
05 Jul 2002 10:08:04 -0400


Josh Sled <jsled@asynchronous.org> writes:

> | I'm torn over whether the Principal Account (and frequency) should be
> | defined here or in the Repayment page...  There are certainly
> | arguments for both ways of doing it.  Consider that you need the
> | Principal Account in order to compute IPMT every period...
> 
> Not really relevant to setting the SXes up, though.  Plus, I think it
> makes more sense that the high-level data about the loan is on one page,
> but specifics of individual repayments are on another.

Except you need to know the repayment schedule to properly setup the
loan schedule.  They are inherently tied together.  You need to know
the payment frequency in order to compute PMT (which is something I
think you should be doing in the Druid to help the user).  I agree
that it should be reasonable to setup a separate Freqspec for the
repayment schedule, but the loan itself needs one.

For example, you could have a loan that has a monthly repayment
schedule, but the user sets up bi-weekly payments.

Or do you really only care about the actual repayments and not the
loan itself?  I was envisioning a Druid where you plug in the
principal, interest, and payment schedule (and maybe escrow amount)
and it will compute and display the monthly PMT amount, which the user
can adjust in the repayment schedule page.

> The overall progression is:
> 
> Inherent Params -> Situation Params -> ("Splits/Payments")+

I guess there is an issue in that some of the parameters affect your
payment requirements, and others do not.  PMI, for example, is added
to your minimum monthly payment, whereas if you escrow Insurance and
Taxes, those values are not directly affecting your minimum monthly
(escrow) payment (they do indirectly affect the escrow payment).

> | > --------------------------------------------------
> | > | Repayment
> | > --------------------------------------------------
> | > Amount        : [ amount entry ]
> | > Assets from   : [ account sel |v] 
> | > Princiapl to  : [ account sel |v]
> | > Interest to   : [ account sel |v]
> | > Remainder to  : [{escrow,principal}|v]
> | > Frequency     : +- freqspec ----------------+
> | >                 |           ....            |
> | >                 +---------------------------+
> | > --------------------------------------------------
> 
> | What exactly is the "amount" here?  Is this the (computed) amount or a
> | value typed in by the user (or a value typed by the user that is
> | initialized to the default value?).  Also, the Remainder-to option
> 
> I guess it could be the formula ... and it could be setup to the appropriate
> default...
> 
> "PMT(...) [+ tax_amt] [+ insurance_amt] [+ pmi_amt] [+prepay_amt]"

Note that this is not necessarily the correct value.  The escrow
amount is not necessarily equal to "tax_amt + insurance_amt".  While
it's a good estimate, it's not what you need.  You really want:

Amount:
Assets From:
Principal To:
Insterest To:
Escrow To:
Remainder to:
Frequency:

And "amount" should default to "PMT() [+ escrow_amt] [+prepay_amt]"

> ...based on the options in the previous step.  Or it could be an option
> for a "simple" amount, with checkboxes and seperate amount entires for
> the sub-parts...  hmm. I don't know, yet.
> 
> | I actually think this page should be moved to the end, after you
> | configure your various payment (insurance, taxes, PMI) options.
> 
> Hmmm.  The only concern I have with that is that people will start into
> the thing and get confused that they missed something... like they've
> gone through 6 pages of the druid and still haven't seen the main thing
> being setup: the repayment of interest and principal.

The more I think about it, the more I think that I'm wrong..  The
Insurance and Tax payments (out of escrow) should be done last.  The
order should be:

Setup-> Loan Information -> Options -> Loan Payment (P/I/E/O) ->
   Escrow Disbursement -> Review & Approval

(P/I/E/O == Principal/Interest/Escrow/Other, where Other might be PMI)

> ...jsled

-derek

-- 
       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
       Member, MIT Student Information Processing Board  (SIPB)
       URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
       warlord@MIT.EDU                        PGP key available