Reypayment calculation after rate drop

[Joker]

My bank dropped my interest rate by 0.8% from the last reserve bank cut. They did this on Oct 20. How does that affect my repayments? Will only part of my monthly repayment have the reduced rate?

 

[tess85]

If your loan is 100% variable (ie. not split between fixed and variable), your repayments are recalculated at the new rate. You can do this calculation in Excel using the PMT function. If you want help with the number-crunching, let us know how many years are left on your loan term; amount owing; and current variable rate! The new repayment depends on all 3 of these factors.

 

[Joker]

Thanks Tess, I found how to do this and am able to do it myself.
http://www.techonthenet.com/excel/formulas/pmt.php

 

[Joker]

so my new rate would apply for the whole month of Oct even though it was effective on 20th?

 

[tess85]

Hmm. So the rate drop became EFFECTIVE on the 20th. So if you're calculating the new repayments, part of that calculation would use the old interest rate, and part of that (after 20th) would be at the new interest rate. But hey! I'm sure the difference is only a few cents in the end. The PMT function should roughly be fine for a quick calculation.

the bank will recalculate it for you anyway, you know.