loan comparison program

compute lowest cost loan
DecisionAide Analytics Loan Comparison Program

Complex Loan Schedules
The #1 Site for Interactive
Multiple Loan Comparisons
Loan Comparison Calculator

Home

Program Overview

FeedBack


Frequently Asked Questions


This site went online at the end of April, 1999. As users contact us with special situations we will add their questions and our answers to this page.

How do I compare a loan that requires an insurance and tax reserve account payment to one that doesn't have such a requirement?
Can I enter a "Less than Interest Only" payment?
How do I input a payment of "Interest Only"?
How do I input an Adjustable Rate loan?

Insurance & Tax Reserve Accounts
The inclusion of payments to a reserve account for insurance and taxes is not a valid part of the loan comparison process. These payments will have to be made whether or not they are paid at the same time as the loan payments.

To make a valid comparison of loans to each other, either all loans must include additional payments for insurance and taxes or must NOT include these payments. In other words, you must compare "apples to apples".

If you include them in all loans, they cancel each other out and thus have no bearing on the outcome. The proper way to compare a loan that requires payment to an insurance and tax reserve account is to:

    1) separately calculate the amount of interest you would lose on monies paid in to the reserve account
    2) see if the present value of the loan that requires reserve payments is lower in cost than the present value of the loan that doesn't require these payments. As long as it is lower by more than the cost of the interest lost then it is better to pay the money into the reserve accounts. Otherwise it isn't better to make reserve account payments.

Return to top of page

Can I enter a "Less than Interest Only" payment?
Yes. Although you cannot enter a "less than interest only" payment initially, you can override the initial input by using the changes section of the screen. To input a "less than interest only" payment you would enter the month that the payment starts being "less than interest only" (it is OK to start in month # 1 with a "less than interest only" payment). From the drop down list you would choose "Change Monthly Payment". In the rightmost column you would enter the payment amount.

Be sure to enter another change to indicate when the payment changes to an amount which will start paying off principal in a later month. If you don't, the program will accrue vast amounts of unpaid interest and will quit calculating after 360 months.

Return to top of page

Can I enter an "Interest Only" payment?
Yes. Although you cannot enter an "interest only" payment initially, you can override the initial input by using the changes section of the screen. To input an "interest only" payment choose the month when payments are to become "interest only". From the drop down list choose "Change Pmts to Int Only". No amount needs to be entered in the rightmost column.

Be sure to enter another change to indicate when the payment changes to an amount which will start paying off principal in a later month. If you don't, the entire principal balance will remain the same for the remainder of the loan. This is OK if it is how the loan is supposed to run. You can always indicate a month number in which the loan will be paid off in full.

Return to top of page

Can I input an "Adjustable Rate" loan?
Yes. This is possible using the changes section of the screen. You would enter the starting interest rate on the left side of the screen. When the interest rate is scheduled to change you would make a change entry on the right side of the screen. You would enter the month number in which the change is to occur, choose "Change Interest Rate", and enter the new interest rate in the rightmost column. Repeat for each change that can occur.

Since the precise amount of the interest rate change may not be known in advance it would be best to use a "worst case" estimate of what the interest rate might be. Most adjustable rate loans have a cap on how much they can go up each year. Using the maximum increase will give you "worst case" results. If the adjustable rate loan is the best loan using "worst case" input, the actual results can only be better than projected if the "worst case" doesn't occur.

Return to top of page

DecisionAide Customer Service: feedback@decisionaide.com
All materials in this site are the sole property of DecisionAide Analytics 1999-2008