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Author: HELJinCT One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 126967  
Subject: Fixed HELOC principal/interest varies?? Date: 11/19/2012 9:59 PM
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I have noticed recently that my fixed rate HELOC seems to have varying amounts of principal applied. This was a secondary mortgage (fixed rate HELOC) on my original home loan from years ago using an 80/10 split to avoid PMI.

The monthly amount is $480.22

2 months ago, at the bottom of the statement it said:
Payment applied as follows: Principal $237.24, Interest $242.98

Then this month it says:
Payment applied as follows: Principal $127.60, Interest $352.62

That low amount of principal caught my eye as I was under the impression that this fixed rate loan should have a steadily increasing amount of principal (and decreasing interest).

What gives?
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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124432 of 126967
Subject: Re: Fixed HELOC principal/interest varies?? Date: 11/19/2012 10:18 PM
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My guess is that they calculate the interest daily rather than monthly. Each payment pays the interest due from the date of the last payment to the date of the current payment, with the balance of each payment going to principal.

So if your actual payment date varies a little bit each month, different amounts will be going to interest and principal. This is different from the typical 1st mortgage, where the payment is considered to be made on the 1st of the month no matter when it it actually paid. (It's more like the way interest is calculated on your credit cards.)

Auto loans also often amortize this way.

--Peter

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