The formula in D9 assumes that the monthly interest payment is equal, namely: initial loan amount times monthly interest rate Neither assumption is correct, which should be apparent if you look at columns F and G of the example attached to my previous posting #2. The formula in D8 assumes that the monthly principal payment is equal, namely: initial loan amount divided by number of paymentsĢ. Manual Formulas (right copied from left except as noted): D8: =D3/D6ġ. Your example is essentially the following: pmt vs mnl calc.jpg Instead, it has to do with a basic understanding of how (regular) loans are amortized. This question has nothing to do with the original posting (loans with offset accounts). I am trying to workout why my PMT and manual calculation are different Is there a limit to the balance of the account that will be offset?ģ. Is 100% of the balance offset against the home loan?Ģ. In either case, the amortization schedule is more complicated.Īnd according to the second cited article, there might be other factors to consider, to wit:ġ. Mathematically, that is the same as the sum of the daily interest based on the daily loan balance minus the daily offset balance. So, in reality, I suspect that the monthly loan interest is based on the previous loan balance minus the average daily offset balance. That defeats one of the benefits of an offset account, to wit: ``Because the offset account acts like an everyday account, your is still accessible whenever you need it, even while it's working to reduce your overall interest payments.`` (Ref: )Īnd of course, presumably the offset account grows monthly by interest earned. That makes the simplifying assumption that the offset balance remains constant throughout the loan term. But the following matches the results (attached) at. I am not familiar with loans with offset accounts.
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