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treatment of mortgage balance

Submitted by bhof890474@comc... on 10 May 2007 - 4:54pm

I noticed a disparity in the treatment of mortgage balances and would like to understand why this is done.

In reviewing the detailed results, I noticed that the housing tab shows the mortgage on my current home will decrease far more than the principal I am paying each year. After reviewing this forum, I realize now that the large decreases are due to the effect of inflation on the real value of the mortgage. Thus, a mortgage balance of $300k and an annual principal payment of $2k will result in a balance of around $289k the following year ($300k - $2k principal - $9k inflation).

But when I change homes 5 years down the line, I notice that the value of my new mortgage no longer decreases beyond the principal I pay in any given year. Why doesn't the future mortgage decrease to reflect the effect of inflation (as happens with my current mortgage)? To return to the example above, a balance of $300k and a principal payment of $2k results in a balance of $298k the following year, instead of the expected balance of $289k.

Why the difference in treatment of mortgage balances between current and future mortgages?

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Submitted by Dick Munroe on 9 June 2007 - 3:10pm.
1

myepiphany at gmail.com wrote:In reviewing the detailed results, I noticed that the housing tab shows the mortgage on my current home will decrease far more than the principal I am paying each year. After reviewing this forum, I realize now that the large decreases are due to the effect of inflation on the real value of the mortgage. Thus, a mortgage balance of $300k and an annual principal payment of $2k will result in a balance of around $289k the following year ($300k - $2k principal - $9k inflation).
Because it's a bug. We've fixed this and included the fix in update available from the website.

Good catch!

Best,

Dick Munroe

Submitted by Dick Munroe on 26 July 2008 - 10:10am.
2

rheamae05 wrote:What do you mean by a bug? How does it apply to mortgage?
Bug = software defect (or, more generally, a defect in anything). More specifically, a defect that either prevents something from functioning correctly or in extreme cases, at all.

It applies to mortgages because there was a defect in the mortgage code that caused the effect reporte by the customer.

Best,

Dick Munroe

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