Why is the final payment on a 30y loan different?

I'm trying to calculate the repayments on a 30y loan.

From what I have seen, the last month's payment is always different,
I would have thought it would be even repayments over the 360 periods.
Why is the last repayment different?

 

Yes in bank loan docs it is always different too. It must be due to the fractions of cents extra each month and the compounding effect to make slight more than the minimum repayment happen which shaves off a few.weeks

 

HI Terry, thanks for the reply.

If banks can calculate the last payment amount at time of contract, why not just calculate the payments evenly though.
I've also seen the final repayment higher then the rest.

 

Is the interest rate on the 30 year loan fixed or variable?

 

rate is variable, and the repayments are subject to change through out the loan.

But at time of contract they provide indicative repayments based on the current rate, and the final repayment is different.

 

Who cares what the indicative final repayment was when it was calculated 30 years ago when IRs have changed during the course of the loan period? It’s always going to be something different.

 

While I recognise those numbers beyond the second decimal place can add up are we talking about sheep stations or just a few dollars? Still, it is curious how numbers crunch sometimes. It lightens the load when you stop.

 

Exactly, it is good to know how and why banks calculate things the way they do.

the difference is over $1k or 20% more then the normal repayments for one example of final repayment I have.

 

Hmm, seems like a close cousin to a Balloon payment.

 

What are those charges - mortgage release, discharge, LTO costs (issue of new title) etc. Although they are a cost, they are not known at the commencement of the loan nor do they form part of the loan amount .

 

post the loan amount and the interest rate and someone will be able to tell you what the minimum repayment will be.

Also it could be due to the day of the month the first repayment is. Some banks calc based on the date of settlement, so first payment is due 1 month after settlement, other banks base it on a fixed date such as the first of the month so the first repayment will be a partial one.

 

Its easier to adjust a final repayment than each payment and its compounding effect. In reality the lender also know that NOBODY EVER has paid the exact 360th final payment and its exactly as modelled. In reality you will pay more sometimes, pay each amount early by a day or two here or there and even a late payment so the actual interest will vary etc and the projected interest wont be the same.

Many lenders will drop a rate and not change the repayment but it acts to shorten the loan term.

I wouldnt get to fussed about the atoms.

I just called STG to do a payout and I also faced a stupid issue....Currently I owe $75.75 but If I pay that today they will slug me $100.40 as a break cost. If I pay the $75.75 in a month i dont. And in a month when I have paid it out they will write me a large cheque for the amount I am in advance (around $5K !!) Oh no they couldnt do this ages ago without a larger penalty (literally thouands) so that was their solution to avoid a break fee that wiped out the advance amount). Huh ?????? St George....Work that illogical issue out !! So they owe me money but will charge a mint to hand it back...Bugger them. *******S. Apparently if I dont "close" the loan by paying off the debt it doesnt trigger the clause. I refuse to pay that game and by waiting they dont win. And I keep paying the min repayment the advance builds but I cat repay the $75.75...I am allowed under the contract five days grace !! (They actually obtained legal advice and had the lawyers tell me that....Idiots !) So I pay off the loan 4 days before the loan term to ensure I dont trigger a break charge.

 

Just to wrap this up, after speaking to nab and getting a yearly breakdown on a 30 year loan, it looks like the difference is due to what Terry mentioned, if your settlement date doesn't occur at the end of the month, you will pay the full months repayment still, and that difference gets sorted out on your final repayment.