loan druid

[Dale Alspach]

I recently refinanced my  mortgage so I thought I would use the loan druid
(Gnucash 1.8.2 RH 7.2) to schedule the payments. I found it quite confusing and it seems to be
giving me an incorrect set of splits between interest and principal.

Suppose I take out a loan for $100,000 at 5% compounded monthly for 180
months. The loan
begins on April 1 and the first payment is due May 1 with 15 days grace
period. I also pay $100 in hazard insurance and $120 property taxes into an
escrow account. Accoring to the gnucash financial calculator the monthly
payment should be $790.79 for principal and interest.

I would like to schedule the payments on the 5th of each month.
I start the loan druid.
I have already created a liability account Mortgage so I choose that for
the Loan Account.
In Amount I enter 100000.00 (Amount seems too cryptic and vague to me.
Initial Principal Balance?)
In Interest Rate I enter 5 (This is problematical: what is the period? What is the
compounding frequency? It seems this means annual nominal rate and monthly
compounding.)
I choose Fixed for the Type.
For Start Date I choose April 1, 2003. Length 180 months. Months remaining
180. (Why is there a choice of Months or Years for Length but only Months
Remaining?)

I move to the Options page. Here I was very confused by the labels.
Do you utilize an escrow account for payments? I assume means  Does your
mortgagor require deposits to an escrow
account?
I check the box and choose Escrow for the account.
Do you pay "Taxes"? I assume means Does your mortgagor require deposits to an escrow
account for taxes? Similar comments for the other labels.
Though unsure I check pay "Taxes" and pay "Insurance".

I go the Repayment page. Why is there a box labelled Name? I have no idea
what this is or what purpose it serves. I leave it as Loan. (Is this waht
goes in the Description field?)
In Amount I see pmt( 0.05000 / 12 : 180 : 100000.00 : 0 : 0 )
which means nothing to me although I see some familiar numbers.
In Payment From: I enter Bank (Again the label is cryptic. Payment from
account?)
Principal To: (Why is this here at all? The loan account was already
created/chosen.) I complete the rest of the form without much difficulty.
Interest to: Deductible Interest
Frequency: Monthly
Start Date:05/05/2003
Every 1 months
On the 5th (The drop down list behaves oddly. The 5th was missing the first
time, but appeared subsequently.)

I go to Payment: "Taxes"

What is Name again? Tax Payment? Does this mean paying into the escrow
account or paying the taxes from the escrow account?
 Why are there Payment
>From (Escrow) and Payment To  (Escrow) boxes (Labels shown but boxes dim)
Payment from (label and box dim) and Payment To (Label and box shown) boxes.
After some trial and error I enter 120.00 in Amount,
I uncheck Use Escrow Account, Specify Source
Account. Enter Bank in Payment from: and Escrow in Payment to:
and check part of payment.

I do similarly for the Payment: "Insurance" page.

Now I go to Review. I see 04/05/2003 payment 790.79, Principal 372.58,
Interest 418.22 Taxes 120 Insurance 100.
Why is this here? The start date for payments was 5/5/2003?
If this were the first payment, the interest should be 416.67 not 418.22.

The next line (05/05/2003)
would be the correct first payment of principal and interest
374.13 and 416.67. Is the first line a bug?

I choose finish. I go to the Scheduled transcation editor. It appears to
have lost track of the month. It claims the Last Occurred transaction was
on 05/05/2003 and shows the next as 06/05/2003.

The template at the bottom is a total mystery, but definitely seems wrong.
There are two sections and each contains everything, so I delete the transaction.

Whatever was the intention of all of those screens, it clearly did not work
for me. For me the natural thing would be to specify the initial principal,
the annual nominal interest rate, the compounding period, the number of
payments, and the frequency of payment. Then let me specify
the payment from account,
the loan liability account and
the loan interest account.
Open a split Transaction Template
with three lines completed with the amounts for the first payment:
Credit the payment from account
Debit the loan liability account
Debit the loan interest account

Let me add additional splits for payments to the escrow account
and a possible additional credit to the payment from account.
(Or other credits and debits)

I do not know if this would cover the needs of other users. Clearly the
druid writer had some much more complex or varied situation in mind.
In any case the druid really needs some help documentation. ( I looked but
found none.)

Speaking of help. I have the rpm for docs installed, but apparently gnucash
does not  know where the files are. (Not found. The specified URL could
not be loaded.) How do I fix this? (I have just been viewing them from
/usr/src/redhat/SOURCES/gnucash-docs-1.8.0/)

Dale Alspach