Principal and Interest Computation Clause Samples
The Principal and Interest Computation clause defines how the amounts of principal and interest are calculated and applied under an agreement, typically in the context of a loan or financial arrangement. It outlines the method for determining the outstanding principal balance, the applicable interest rate, and the frequency and manner in which interest accrues and is paid. For example, it may specify whether interest is calculated on a daily or monthly basis and whether payments are applied first to interest or principal. This clause ensures transparency and consistency in financial calculations, helping both parties understand their payment obligations and reducing the risk of disputes over payment amounts.
Principal and Interest Computation. All Mortgage Loans must amortize with interest calculated and paid in arrears. Under this method, the interest due from a Borrower on a Due Date is calculated based on (a) the Unpaid Principal Balance of the related Mortgage Loan prior to application of the principal portion of the related current Monthly Payment, (b) thirty days interest at the related Mortgage Interest Rate and (c) adjusted as herein provided for the effects of Curtailments, Partial Liquidation Proceeds, Prepayments in Full and Liquidations. The calculated interest portion is then subtracted from the related Monthly Payment to obtain the principal portion. The principal portion is then applied to the Unpaid Principal Balance of the related Mortgage Loan. The amount to be applied to interest for a multiple installment must be calculated using the Unpaid Principal Balance of the related Mortgage Loan remaining after the previous interest calculation and principal application.