Choose Prepayment Recalculation Method at Repayment Time

When configuring dynamic mortgage products in Mambu, the user must specify the default prepayment recalculation method to be applied in the event of prepayments or overpayments. The two available options are Reduce Amount Per Installment (RAI) and Reduce Number of Installments (RNI).

For dynamic mortgage products, you also have the option to choose the prepayment recalculation method at repayment time. This provides increased flexibility as you are not solely constrained by the initial product selection, and the need to process all repayments in line with the choice of product type. This feature empowers users to make real-time decisions about how a specific prepayment impacts the loan schedule, offering enhanced flexibility and responsiveness to varying financial situations.

For a detailed explanation of how Reduce Amount Per Installment (RAI) and Reduce Number of Installments (RNI) methods work, refer to the following page: Prepayment Recalculation Methods.

How it works

This new functionality introduces flexibility at the point of repayment, allowing for a one-time override of the default account-level prepayment recalculation method for a specific transaction.

When posting a repayment for a dynamic mortgage account, the user will now see a dedicated checkbox. This checkbox enables the user to specify which prepayment recalculation method should be applied for that particular repayment. The available options to choose from will be Reduce Amount Per Installment (RAI) and Reduce Number of Installments (RNI).

Here’s a breakdown of the logic:

• If the checkbox is not checked: The repayment logic will proceed using the default prepayment recalculation method configured at the account level. The schedule will be recalculated based on this default setting.
• If the checkbox is checked, and the selected prepayment recalculation method is the same as the account's default: The schedule will still be recalculated based on the default account prepayment setting. Essentially, selecting the same option as the default does not alter the outcome.
• If the checkbox is checked, and the selected prepayment recalculation method is different from the account's default: For this specific pre/overpayment, the loan schedule will be recalculated based on the chosen method for this one repayment only. Subsequent repayments, unless another override is selected, will revert to using the account's default prepayment recalculation method.

API parameters used for prepayment recalculation selection

Prepayment recalculation is available through the POST /loans/{loanAccountId}/repayment-transactions endpoint with the prepaymentRecalculationMethod parameter.

To choose one of the above prepayment methods, you can use the following values:

• REDUCE_NUMBER_OF_INSTALLMENTS_NEW
• REDUCE_AMOUNT_PER_INSTALLMENT