loan/mortgage repayment via sched xactions: feedback request

[Derek Atkins]

Olaf Faaland <ofaaland@attbi.com> writes:

> Clearly the alternate payment schedule can only be ongoing (and therefore a 
> candidate for an SX) if the bank agrees to it.  So I'm thinking that means 
> either
> 
> 1. PV(rate, nper, pmt) = PV(rate, nper', pmt'), or 
> 2. nper' > nper, and the bank is effectively just waiting for the next due 
> date to apply all the money they received since the last due date.

The problem is that the user generally knows only the annual interest
rate, not the periodic rate, which means they need to know the Bank's
Freqspec in order to compute "rate".  For example, if you know your
loan is 7%, you need to know whether this is 0.58333% per month or
.26923% per two weeks.  This is what the first Freqspec is for, to
compute the periodic rate.  Note that this FS is *not* part of any SX,
per se.  It's part of the loan definition.

The second Freqspec is part of the repayment SX, which defines how
often you send a payment for your loan.

> As an aside, for case #2, I would think that any bank would allocate $$ to 
> interest first, but after that it might depend on the bank.  

Not necessarily.  In fact, in my experience banks apply over-payments
to principal, not interest.  Once you pay off your interest for the
period, all leftover payment is applied to the principal (thereby
"paying down" your loan.

> Olaf

-derek
-- 
       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
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