loan druid

[Jim Stead]

On Saturday 22 March 2003 08:20 pm, Dale Alspach wrote:
> 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
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Boy, I just used the loan druid for several different loans, and I 
don't recall it being that confusing.  I do remember that I had to 
set the loan date one month earlier than what it seemed to be (I 
think it was the second tab, one where you set where you start the 
repayment).  My loans were all continuations, not from the first 
statement.

I do agree that documentation is required.  I think everyone realizes 
that.

One feature I liked is that the end result was transparent (the SX 
with the formulas).  I could change around how the payment was 
structured after I went through the wizard.  I had put in the 
estimated monthly insurance and tax stuff, but it always changes from 
what is actually paid, and I pay more than one type of tax, and some 
other reasons.  Anyway, I deleted most of the stuff that I paid out 
of escrow and just enter it as my statements come in.  For me it was 
easier.  It was nice that I could do that without going through the 
wizard again.

I just transitioned from MS Money, and GnuCash does not have the 
polish that Money does, but it does not have the bloat, or the ads, 
or the obfuscation that Money does.  I appreciate the transparency 
and especially the double entry principal.  Many of the things I ran 
reports for in Money are just staring me in the face in the accounts 
view in GnuCash.

Great job GnuCash developers.

Sorry to ramble, but no one forced you to read to the end.

Jim