HELOC interest calculation problem - Can Quicken do it?

ConnieZimmermann

Hi, I have set up a HELOC and was able to Edit the Account to say that there is a 3.5% interest rate.  But I can't figure out how to get quicken to calculate the interest.  The balance in Quicken is always lower than the real balance.  I know I must be missing something basic in the setup, but I'm lost.   Is there a way to do this?   What is happening now is that I show the opening balance and then monthly payments.  I'd like to be able to continue to use this line of credit in the future with more charges, but if I already can't figure it out, I know I'll make a huge mess when I try to do that!    Thanks in advance for help with this.

NotACPA

Q can only calculate the Principal/Interest split (i.e., the Amortization) on a conventional loan, such as a traditional mortgage.

It's can't calculate the amortization on any other loan type.

You'll need to simply input a reasonable guess ... and then correct it when your next statement comes.

You'll probably need to go back and edit any prior payments to make the needed corrections.

ConnieZimmermann

Thanks so much NotACPA.     I tried it again and made a new Account as a Loan instead of a HELOC, and it allowed me to set number of months and interest rate and monthly note.  But... I had to fiddle with the interest rate in order to get it to make the monthly note match.  But it's much better than what was happening before.  Now I have a true Pay Off Balance.   But... when I write checks from this HELOC I think I'll have a headache then.  Any ideas?

This HELOC loan is on a per-diem calculation.

NotACPA

With additional, and sporadic, draws against the HELOC, there's NO WAY that Q can calculate the interest.

Just do it manually, as I previously suggested.

Mark1104

the interest should be 3.5%/365 times the number of days between the draws / paydowns 

the rate is probably variable, so it will also change when the underlying reference rate (prime rate?) changes

ConnieZimmermann

<blockquote class="Quote">
<div class="QuoteAuthor"><a href="/profile/Mark1104" class="js-userCard" data-userid="8400267">Mark1104</a> said:</div>
<div class="QuoteText">the interest should be 3.5%/365 times the number of days between the draws / paydowns 

the rate is probably variable, so it will also change when the underlying reference rate (prime rate?) changes</div>
</blockquote>

Thanks Mark!

NotACPA

Mark1104 said:

the interest should be 3.5%/365 times the number of days between the draws / paydowns 

the rate is probably variable, so it will also change when the underlying reference rate (prime rate?) changes

And how do you factor in multiple draws in the same month and timing of the payments to the account?

It is, simply, no where near as simple as you claim.

Mark1104

@NotACPA - even if there are multiple draws or payments during the month, the Bank will charge the interest as I stated: 

"the interest should be 3.5%/365 times the number of days between the draws / paydowns"

so the per diem could be different at different times of the month predicated upon draws or paydowns that occurred during the month (or if the prime rate changes during the month)

Tom Young

@Mark1104

You're absolutely correct that the calculation of interest on a HELOC isn't terribly difficult, even with sporadic draws and pay downs, but the salient point is that Quicken simply can't do this calculation.  The programming to do so just isn't there.

NotACPA

Mark1104 said:

"the interest should be 3.5%/365 times the number of days between the draws / paydowns"

so the per diem could be different at different times of the month predicated upon draws or paydowns that occurred during the month (or if the prime rate changes during the month)

And who, in their right mind, would want to calculate that manually???

It's simpler to just wait until the next statement.

ConnieZimmermann

I think my workaround is going to solve my problem. I set it up as a loan instead of a HELOC and fiddled with the interest rate until the monthly payment worked out. When I add to the HELOC I'll fiddle with it again. It's a shame that it's not automated more because HELOCs are so common, but it is what it is!

NotACPA

HELOC accounts aren't automated because, like any other Daily Interest loan, the interest due on the NEXT statement is largely dependent upon when THIS month's payment is posted by the lender AND dependent upon when additional draws are posted by the lender.

Contrast this with a traditional mortgage (or any other "Monthly Interest" loan) where the principal/Interest split (i.e., the Amortization) is known as soon as the loan is approved and can be calculated for the entire term of the loan.

Mark1104

@NotACPA - agreed! (as long as it is a fixed rate loan  )

NotACPA

A variable rate loan is almost always "Daily Interest"