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#1095963 - 12/11/08 07:55 PM APR calculation
mdog76 Offline
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Joined: Jan 2007
Posts: 645
I am using a quick APR calculation in Excel using the rate function as back room check. It works fine with "normal" loans, but loans with a sigle payment at maturiry it doesn't like. Any suggestions are welcomed.

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#1095966 - 12/11/08 07:58 PM Re: APR calculation mdog76
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 79,268
Galveston, TX
Why not use the APRWIN calculator?

http://www.occ.treas.gov/aprwin.htm
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#1096268 - 12/12/08 02:46 PM Re: APR calculation rlcarey
ComplyWithMeToo Offline
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Posts: 225
rlcarey, I'm attempting to use APRWIN to verify APRs against interest rates for our mortgage rate sheet.

I'm not understanding one column on the "Payment Schedule" input screen, and the help feature is helping. Can you explain what we would use as Unit Periods - it defaults to 1.

Thanks

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#1096405 - 12/12/08 04:28 PM Re: APR calculation ComplyWithMeToo
ktac MITCH Offline
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ktac MITCH
Joined: May 2005
Posts: 1,813
Giant side of TX
I don't know that I can explain BUT it is basically the time period between payments (normally monthly)

What I always do after the pmt amount is entered and it goes to the Unit Period field, is go to the calendar button to the right and put in the actual Note Date and First Pmt Date and let the software calculate the Unit Period and Odd Days.
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#1096456 - 12/12/08 04:59 PM Re: APR calculation ComplyWithMeToo
Richard Insley Online
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Richard Insley
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Toano, VA
The concept of a unit period is spelled out in Appendix J of Reg. Z. As Ralphie MITCH indicates, one UP is however much time passes from one payment to the next--for most bank loans, one month. For good business reasons and customer service, most installment lenders schedule a first payment that is more or less than the normal payment period. Usually referenced as "odd days", this one odd period puts the borrower on the desired cycle--regardless of when the loan is originated.

The APR calculation is as sensitive to the passage of time as to the dollar amount of Finance Charge, so APRWIN accepts any pair of dates and crunches them (according to the Appendix J rules) into whole UPs and odd days. It also allows you to enter these values directly, if you know them.

After the first payment period APRWIN will default to uniform payment periods unless you override the UP/odd-day values it has predetermined. You would only need to override if your loan is scheduled to have "odd days" in more than the first payment period. The only good example of a loan product with multiple odd days would be a "school teacher loan" which has built-in skips during summer months.
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#1096551 - 12/12/08 06:19 PM Re: APR calculation Richard Insley
ComplyWithMeToo Offline
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Joined: Feb 2007
Posts: 225
Since, I am basically wanting to use APRWIN to verify that our rate sheet is accurately disclosing the APR.

On the rate sheet we disclose:

APRs assume closing on first day of the month, a downpayment of at least 20%, no origination fee, prepaid finance charges of $555. Payment amount base on $100,000. Your actual APR may vary.

Should I be keying in a 1 for the UP and 0 odd days? (since I am not using the calculator to verify an actual TIL). Or should I use a different calculator for this purpose.

All the help I can get would be most appreciated!

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#1096561 - 12/12/08 06:30 PM Re: APR calculation ComplyWithMeToo
ktac MITCH Offline
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ktac MITCH
Joined: May 2005
Posts: 1,813
Giant side of TX
Gien that you are assuming closing on the 1st & talking about 100,000 base = I assume . . .It is a mortgage loan with payment required to be on the 1st for secondary market purposes
Then yes the time between loan date and first payment (and all subsequent pmts) is 1 month, or 1 Unit Period with no odd days.
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#1096847 - 12/12/08 10:25 PM Re: APR calculation ComplyWithMeToo
Richard Insley Online
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Richard Insley
Joined: Oct 2000
Posts: 10,056
Toano, VA
For advertising purposes, one assumption about odd days is as good as another, so keep it as simple as possible and assume there are none. Even if you decide to use odd days, as long as you increase the prepaid interest in step with an increase in the number of odd days, there's almost zero effect on the APR.
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