Understanding the Payments on a Simple-Interest Florida Mortgage
A major reason why the home ownership process can be so complicated? The fact that there are so many types of Florida mortgages from which you can choose. This article is dedicated to the resource known as “simple-interest” and how you can develop an amortization schedule based on it.
What is a simple-interest Florida home loan?
A simple-interest mortgage is one on which interest is calculated daily instead of monthly. On a 6 percent Florida mortgage loan, for example, .06 is divided by 365 to obtain a daily rate of .016438 percent. This is multiplied by the balance every day to calculate the daily interest. On monthly accrual loans, in contrast, .06 is divided by 12 to obtain a monthly rate of .005, which is multiplied by the balance every month to obtain the monthly interest.
While amortization schedules are often printed out for monthly accrual loans, this is far more challenging for a simple-interest loan. The logistics are just too formidable. Where an amortization schedule for a 30-year monthly accrual mortgage has 30×12 = 360 lines of numbers, the simple-interest loan has 30×365 = 10,950 lines. Assuming 50 lines a page, you would need 219 hard-copy pages.
And that’s just for starters. Your first schedule would assume that all payments are posted on the due date, say the 17th of the month. If your first payment is actually credited on the 16th or the 18th, assuming you want the schedule past that point to be accurate, you would have to redo the entire schedule. The same holds if you make an extra payment at any time.
Note that on a simple-interest loan, what matters is not when you make the payment but when the lender credits your account. On a monthly accrual Florida mortgage, if you pay on the eighth and your account is not credited until the 10th, it doesn’t matter because your payment is within the grace period.
But on a simple-interest mortgage, the two days between payment and posting will cost you two days of interest. Make sure you understand how all this works; complete our FREE ONLINE FORM and learn more today.
