[Lnc-business] Prepayment on office mortgage

[Daniel Wiener]

Hi Wes,

In answer to your question, I dug out the attached amortization spreadsheet
for the office mortgage.  By changing the value of he additional bi-annual
payment in cell B9, you can see what the remaining balance will be after
ten years in cell B12.  For example, if we make an extra $60,000 payment in
December of odd-numbered years (as now specified in the Policy Manual), the
balance would be paid off in less than ten years (i.e., cell B12 shows a
negative balance of $6,808.21).

If you zero out cell B9 so there are no extra payments towards the
principal, the ten-year balloon balance is $367,741.21 in cell B12.  If we
were to instead make an extra $10,000 payment in April, 2015 (i.e.,
subtract an extra $10,000 in cell F16) it would reduce the ten-year balance
to $352,282 in cell B12 (a savings of $15,459.21).  On the other hand, if
that same $10,000 extra payment is delayed three months to July, 2015
(i.e., subtract the $10,000 in cell F19) it produces a ten-year balance of
$352,467.94 (a savings of $15,273.27).  So the cost (at the end of the ten
years) of delaying a $10,000 payment by three months is $185.94.  You can
play with the spreadsheet to plug in other extra payments at other times to
see what the alternative results will be.

The basic conclusion is that paying down the mortgage as soon as the funds
come in to the building fund, rather than waiting to do so twice a year,
will save us a few hundred dollars over the long tern (especially when done
early in the ten-year period).  It's not a huge difference, but it's not
nothing.  However, don't empty out the building fund if there's a potential
for other expenses associated with the office move.

Dan Wiener

-- *"In general, we look for a new law by the following process. First, we
guess it (audience laughter), no, don’t laugh, that’s the truth. Then we
compute the consequences of the guess, to see what, if this is right, if
this law we guess is right, to see what it would imply and then we compare
the computation results to nature or we say compare to experiment or
experience, compare it directly with observations to see if it works. If it
disagrees with experiment, it’s WRONG. In that simple statement is the key
to science. It doesn’t make any difference how beautiful your guess is, it
doesn’t matter how smart you are, who made the guess, or what his name is.
If it disagrees with experiment, it’s wrong. That’s all there is to it.”*
-- Richard Feynman (https://tinyurl.com/lozjjps)
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://hq.lp.org/pipermail/lnc-business/attachments/20150329/f5ceed72/attachment-0001.html>
-------------- next part --------------
A non-text attachment was scrubbed...
Name: Loan amortization schedule for LNC office 2-13-2014.xlsx
Type: application/vnd.openxmlformats-officedocument.spreadsheetml.sheet
Size: 22856 bytes
Desc: not available
URL: <http://hq.lp.org/pipermail/lnc-business/attachments/20150329/f5ceed72/attachment-0001.xlsx>