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#10499 - 02/14/02 09:13 PM Need some math help
BankerMama Offline
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BankerMama
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Please, I need help fast!!
In doing a historical example for a HELOC with interest only payments for the first 5 years........on the 61st month a payment of 1.6% of balance will be due plus accrued interest. No problem with the payment amount BUT the principal to be listed on year #6 (61st payments)is the question.

Question....Would you subtract $160 (1.6%) from $10,000 = $9,840 OR would you add back the accrued interest for the month to the $10,000 and subtract the $160 from that??


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#10500 - 02/14/02 09:33 PM Re: Need some math help
redsfan Offline
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The Pennant Race
Since you are requiring the payment of accrued interest PLUS the principal reduction, I would say $9,840 is the balance at the end of month 61.

I always used to list the principal balance as of year-end, so I would disclose the month 72 principal balance. If I did my calculations correctly, that would be 8,374.25 in your example.

For payment, I would always disclose the highest payment in the year, so that woule be the month 61 payment.

[This message has been edited by pbrinker (edited 02-14-2002).]

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#10501 - 02/14/02 10:02 PM Re: Need some math help
BankerMama Offline
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Well that is what I think as well but an examiner is telling me different. It doesn't make any sense.

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#10502 - 02/14/02 10:13 PM Re: Need some math help
redsfan Offline
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redsfan
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The Pennant Race
Based on what? The key in your statement is that you are paying accrued interest PLUS the 1.6% principal payment. The payment amount will be equal to the accrued interest PLUS the $160 principal reduction.

Even if you add back the accrued interest, your payment will still subtract the accrued interest PLUS the principal payment. One way or another, you reduce principal by $160 in month 61.

Are you sure that your program calls for a payment of 1.6% of the principal balance PLUS accrued interest? Does the examiner your are working with understand that?

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#10503 - 02/14/02 10:31 PM Re: Need some math help
BankerMama Offline
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Oh yes, definitely. We have talked in detail and this is exactly the way it works. I didn't get an answer yet on my last question to her where I pointed out that I didn't think we could add the interest back to the $10,000 if it were being paid. I don't have many brain cells left today after this. Oh well, I am just going to think about it tomorrow as Scarlet would have said!

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#10504 - 02/15/02 01:50 PM Re: Need some math help
Anonymous
Unregistered

Where is it required that the historical example for a HELOC include the principal balance? None of the examples in Appendix G disclose the principal balance, so why would you want to include that? Better yet, why is an examiner requiring it?

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#10505 - 02/15/02 01:56 PM Re: Need some math help
BankerMama Offline
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Posts: 1,543
Lee, principal balance is not included on the historical example, however, you must use the correct principal balance to determine the interest due and thus getting the payment amount correct for each of the 15 years.


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