Home Equity Loan - Interest computed on a 365/365 simple interest basis

  • Thread starter Kathleen Anderson [MVP - FrontPage]
  • Start date

K

Kathleen Anderson [MVP - FrontPage]

I recently took out a Home Equity Loan with Bank of America and set it up in
Money 2004. The first payment was taken by auto-debit a couple of days ago.
The figures on the BOA web site (current principal balance and interest
paid) do not match what Money calculated. The remaining balance according
to BOA is higher than Money, and the interest is lower.

I looked at the note and it says: "Interest on this Note is computed on a
365/365 simple interest rate, that is, by applying the ratio of the annual
interest rate over the number of days in a year, multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding."

I'm assuming that Money does not calculate this way - is there any way
around this? Or have I done something wrong?


--

~ Kathleen Anderson
Microsoft MVP - FrontPage
Spider Web Woman Designs
web: http://www.spiderwebwoman.com/resources/
 
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C

Cal Learner-- MVP

In microsoft.public.money, Kathleen Anderson [MVP - FrontPage]
wrote:
I recently took out a Home Equity Loan with Bank of America and set it up in
Money 2004. The first payment was taken by auto-debit a couple of days ago.
The figures on the BOA web site (current principal balance and interest
paid) do not match what Money calculated. The remaining balance according
to BOA is higher than Money, and the interest is lower.

I looked at the note and it says: "Interest on this Note is computed on a
365/365 simple interest rate, that is, by applying the ratio of the annual
interest rate over the number of days in a year, multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding."

I'm assuming that Money does not calculate this way - is there any way
around this? Or have I done something wrong?
The best thing to do is usually to leave the interest rate blank,
and to enter the other data into the load for Money. So enter the
payment size, duration, principle, and balloon data.
 
K

Kathleen Anderson [MVP - FrontPage]

Cal Learner-- MVP said:
In microsoft.public.money, Kathleen Anderson [MVP - FrontPage]
wrote:
I recently took out a Home Equity Loan with Bank of America and set it up
in
Money 2004. The first payment was taken by auto-debit a couple of days
ago.
The figures on the BOA web site (current principal balance and interest
paid) do not match what Money calculated. The remaining balance according
to BOA is higher than Money, and the interest is lower.

I looked at the note and it says: "Interest on this Note is computed on a
365/365 simple interest rate, that is, by applying the ratio of the annual
interest rate over the number of days in a year, multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding."

I'm assuming that Money does not calculate this way - is there any way
around this? Or have I done something wrong?
The best thing to do is usually to leave the interest rate blank,
and to enter the other data into the load for Money. So enter the
payment size, duration, principle, and balloon data.
Thanks, Cal. I will give that a try. I also called BOA and asked them to
send me a copy of the amortization schedule for the note - it's coming by
snail mail - I should receive it in 5 to 10 business days. It'll be
interesting to see if I can get this to match up.


--

~ Kathleen Anderson
Microsoft MVP - FrontPage
Spider Web Woman Designs
web: http://www.spiderwebwoman.com/resources/
 
C

Cal Learner-- MVP

In microsoft.public.money, Kathleen Anderson [MVP - FrontPage]
wrote:
Thanks, Cal. I will give that a try. I also called BOA and asked them to
send me a copy of the amortization schedule for the note - it's coming by
snail mail - I should receive it in 5 to 10 business days. It'll be
interesting to see if I can get this to match up.
You will find that the Money method matches most loan amortization
utilities. If the bank's method shows you owing more than what Money
expected, their "simple" interest is a bit creative. It probably
means that you are paying interest on some of the principle you paid
off already.
 
C

Chris Cowles

Kathleen Anderson said:
Thanks, Cal. I will give that a try. I also called BOA and asked them to
send me a copy of the amortization schedule for the note - it's coming by
snail mail - I should receive it in 5 to 10 business days. It'll be
interesting to see if I can get this to match up.
I think you can view that on the BofA web site, can you not?

Do try to improve but don't try to match it up exactly. You won't. Do as Cal
states, and accept the few cents or dollars difference per month. At the end
of the tax/calendar year, enter an adjustment directly in the loan account,
categorized to mortgage interest. Your tax reports will match the bank at
that point, and future payments will calculate a little closer to the banks,
compared to not making the adjustment.
 
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D

Dick Watson

Gee, if I had an answer to this, I'd love to trade it for some insight into
why FrontPage PhotoGallery produces pages that are so utterly useless on
anything besides a Windows web host.

My best guess would align with Cal's input.
 
K

Kathleen Anderson [MVP - FrontPage]

Chris Cowles said:
I think you can view that on the BofA web site, can you not?
Yes. I discovered another section called "Service My Mortage", created an
account, and got the schedule. What's really odd is that the principal and
interest figures are pretty close to each other - within a couple of
dollars - but the principal balance is off by about $240.00.
Do try to improve but don't try to match it up exactly. You won't. Do as
Cal states, and accept the few cents or dollars difference per month. At
the end of the tax/calendar year, enter an adjustment directly in the loan
account, categorized to mortgage interest. Your tax reports will match the
bank at that point, and future payments will calculate a little closer to
the banks, compared to not making the adjustment.
I'll give that a try. Thanks.
 
C

Chris Cowles

Kathleen Anderson said:
Yes. I discovered another section called "Service My Mortage", created an
account, and got the schedule. What's really odd is that the principal and
interest figures are pretty close to each other - within a couple of
dollars - but the principal balance is off by about $240.00.
I'll guess it's related to the initial payment period. Money assumes 30
days. The lapse between funding and initial payment probably was more than
that. An adjustment dated 1 day after the initial payment, to match it to
the bank's figures, probably will result in Money prompting you to adjust
interest on subsequent payments. Let it, and check out the result.

Do a backup first.
 
K

Kathleen Anderson [MVP - FrontPage]

Chris Cowles said:
I'll guess it's related to the initial payment period. Money assumes 30
days. The lapse between funding and initial payment probably was more than
that. An adjustment dated 1 day after the initial payment, to match it to
the bank's figures, probably will result in Money prompting you to adjust
interest on subsequent payments. Let it, and check out the result.

Do a backup first.
It was almost 60 days.

What about adjusting the initial payment, to reflect the way BOA applied the
payment?
 
C

Chris Cowles

Kathleen Anderson said:
What about adjusting the initial payment, to reflect the way BOA applied
the payment?
That's an equally valid approach. Do a backup first.
 
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K

Kathleen Anderson [MVP - FrontPage]

Chris Cowles said:
That's an equally valid approach.
I did it - the results are a lot closer than before. Thanks.
Do a backup first.
I always do. I was actually getting ready to move Money to a different PC
with more memory, so I killed two birds with one stone.

Thanks for your help,
 

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