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Envision Financial contracted internationally-renowned accounting firm Grant
Thornton to develop the mathematics behind the Redfrog savings calculator.
Please note, however, that the calculations are approximations, based on a set
of simplifying assumptions regarding formulae and future events. As a result,
actual results will vary.
General assumptions used in our calculator
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For the purpose of the calculator, the current Redfrog interest rate is applied
to the entire term of the loan.
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Interest is calculated on a daily basis and is chargeable to the account at the
end of each month.
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Income and expenses are constant over the term of the loan.
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Expenses are calculated as the difference between total monthly income and the
member's estimate of monthly savings. Expenses are then calculated on a daily
basis and are debited from the account on the last day of the month.
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Deposits are assumed to occur on the first day of the month. Expenses are
assumed to occur on the last day of the month, and are debited from the account
on the last day of the month.
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The interest rate of the member's current mortgage is assumed to apply to the
remaining term of their mortgage.
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If the member elects to transfer any existing debt to the mortgage amount, this
is done in a lump-sum fashion. That is, the amount of any outstanding debt
(such as credit card balances or a car loan) is simply added to the Redfrog
balance.
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If the member elects to transfer any existing savings to the mortgage
amount, this is done in a lump-sum fashion. That is, the amount of the savings
is simply added to the Redfrog balance to reduce the outstanding borrowings. The
foregone interest that may have been earned on these savings is not considered.
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Timing of deposits:
Initial account balance
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Credited on the 1st of the month
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Weekly income
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Credited every 7 days from start of loan
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Bi-weekly income
| Credited every 14 days from start of loan
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Monthly income
| Credited on every 1st of the month
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It is recommended that the account holder have life insurance to cover the amount
of total borrowings. The life insurance premium is not included in the
calculations.
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Whenever deposits are made to the account, the total borrowings are reduced by
the amount of the deposit.
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Calculations involving traditional mortgages assume semi-annual compounding. (...top)
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