Posted by Michael Morrongiello on March 25, 2000 at 22:48:32:
First off, ths note does not amortize over 240 months fully. I calculate that it actually amortizes out over 247.84 months.
As for the calculations; Different note investors use different methods & agreements to calculate and represent what their interest would be in a note that was purchase on a PARTIAL PURCHASE agreement. You really need to look at the Partial purchase agreement itself which should spell out what happens to the note in the event it prepays before the note investor is able to collect all the payments it contractually purchased.
There are (2) two schedules that are being tracked. The actual note repayment schedule and the PARTIAL repayment schedule or “PV” purchased schedule.
The most common method of representing ones interest in the note as an investor and one that we use quite often is to simply take the # of payments purchase (in this case 120), the actual payment amount ($412.88), and the actual note interest rate (8%), and then plug those into a financial calculator and solve for the missing variable or "PV " present value. In this case it would be $34,030.18. What we have just done is create a note funders “Amortization Schedule B”
This means that the note investor is entitle to collect $34,030.18 that will eventually pay down each month and amortize down to a ZERO balance.
If the $50,000.00 note were to pay off today then the note funder would be entitle to retain and collect $34,030.18 from the $50,000.00 actual note principal balance due. The rest of the funds ($15,969.82) would go the the holder of the “residual” interest in the note.
If the note were to pay off in 60 months then the actual note principal balance would be $44,155.16 and the note investors “B” schedule balance would be $20,362.59. Again the funds over and above what is due to the note funder would go the “residual” note holder at that time ($23,792.57)
I hope this helps.