Looking for thoughts on how to have attorney to structure this deal. My concern is monthly prepayment of principal. The details are purchase of $129,000, 20% down payment, amortized over 15 years. This gives a monthly payment of $763, Interest of $29,853 and principal reduction of $61,750 during the ten years with a balloon of $41,450. We have an agreement of being able to pay down the principal monthly, if I desire.

Many attorneys have programs that supply all their legal forms. You fill in the variables-- names, numbers, dates, that sort of thing-- and pow! You have a standard legal text.

Have you asked your attorney if he's done this kind of form before? As long as you can say, "I want A, B, and C to be included in the agreement," which you seem to be able to do, he should be able to provide the verbiage that connects all those ideas, and does it in a way that's compatible with standard county/state/federal/whatever law.

It should be fairly simple. Be sure the following are clearly spelled out:

1) no pre-payment penalties

2) how often interest is calculated (daily, monthly)

Once that is established, any spreadsheet program and/or mortgage calculator will give the same answer as to how much is due, and how extra payments are applied. Typically, an additional principal payment is exactly that: it reduces principal only. Interest due is calculated on a monthly basis as how much balance outstanding remains on the date the regular payment is due.

Daily interest is only calculated if you are doing a full pay-off. That's how it works in every loan I've ever paid off, anyway.