Comments inline.

"Aaron Segal" <money[at]drsegal.com> wrote in message
news:1db801c42738$ef40a6e0$a101280a[at]phx.gbl...
- quote -

How will it hurt?

- quote -

Create a Loan Account with a P+I of 860.36 and the principal per the
disclosure sheet. Setup the scheduled Loan Payment for the $860.36 and add a
Transfer to an escrow cash account of $419.97 for a total payment of
$1280.33

- quote -

And this is bad because? First, this kind of an error is probably fairly
close to irrelevant. The total error is only a little more than a dime a
payment. Second, I'm wondering if your initial prinicpal you told Money
about doesn't match what the bank used to calculate the payment. This can
happen, for instance, if there was some interest for a long first payment
interval added back into the principal balance or similar. Was there some
extra charge in here somewhere? Seems to me like a careful reading of the
HUD disclosure is in order (this is in the US?)--whatever other games they
are playing the disclosure forces them to quote the loan in a standard way.
They may just tell you that the rate calculated the normal way works out to
6.0025%. In which case, the whole "compounding" deal is just a way to milk
an extra $38 out of you over the life of the loan.

FWIW, when I calculate this loan in M04 ($143,500 pv, 30 years * 12 = nper,
monthly payments, $860.36 pmt in M04, 6% rate), it resolves this exactly to
your values, not 6.0025%. What pv are you using?

Also, FWIW, if I go and compute the effect of compounding the 6% rate 365
times, I get an effective rate of 6.183%, not 6.0025%. I'm probably missing
something here.

- quote -

I'm not sure what problem you think this causes, even if it is somehow a
factor here.

- quote -

No. Money takes the amount of the balance and multiplies it by the
appropriate fraction of the annual interest rate to compute the interest
portion of a payment and then subtracts this amount from the pmt to get the
principal component. Just like most banks do.

- quote -

In microsoft.public.money, Aaron Segal wrote:

- quote -

The two variables you will have to come up with are the loan length
and the balloon amount. If you know the amount you will owe after
five years, you could enter that as the balloon amount.
- quote -

I would not see that as a problem myself. If you track down
amortization calculators on the web, you will find they match
Money's result.

- quote -

I don't know of such a thing.

I'm not sure I understand how that will help.

My situation for example is a mortage on a 5-1 ARM. We are
still very early in the initial 5-years, and will sell the
house before the interest rate changes.

So our interest rate is 6.0%
Monthly payments are $1280.33 - these include the
principal, the interest, and escrow payments.

My Interest + Principle is always $860.36 (but they each
vary somewhat per month as the total balance changes).
The escrow is always the same $419.97

So, how would I enter this into money?

If I leave the interest rate blank, it tells me the rate is
6.0025%

I'm not sure this will alleviate the problem of monthly vs
daily compounding.

Do you know if there is simple a way to tell Money how
often to calculate the compound interest?

Thank you,
Aaron

In microsoft.public.money, Aaron Segal wrote:

- quote -

When you enter a loan, it is better to enter the payment data and
let Money computer the rate.

It seems Money (2004) defaults to compounding mortgage loan
interests daily. My bank compounds once monthly.

As such, our balances are always off by a few dollars.

Any suggestions?