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Carry forward balances at reschedule or refinance

When a mortgage is rescheduled or refinanced, accrued interest that has not yet been applied is typically written off. The Carry Forward feature allows you to preserve the accrued interest amounts by transferring them to the new loan account, without needing to capitalize them. This ensures transparency for the customer and prevents the unintentional loss of owed interest, fees, or penalties for the lender.

Prerequisites​

To use the Carry Forward functionality, the target loan account must meet the following conditions:

  • Product type: The target account must be a mortgage product (Dynamic Mortgage or Interest-Only loans). Non-mortgage products will not display carry-forward options.
  • Repayment allocation: The target product must have "Custom Repayment Allocation" enabled. This is mandatory as most carried-forward balances are repaid via custom repayments outside the standard schedule. For more information, see Processing Loan Repayments.
  • Account state: Only "Active" or "Active in Arrears" accounts are eligible. Locked or Closed accounts cannot be rescheduled.

Use cases​

  • Internal rescheduling: Changing between Dynamic Mortgage and Interest-Only products or extending loan terms.
  • Refinancing/rescheduling: Increase the borrowings to the customer or Choosing to extend the term of the loan.

Carry forward balances

Handling types of balances​

Principal and Arrears​

  • Current principal outstanding: Equates to the total amount of principal that needs to be repaid.
    • New account's schedule amoritized principal: This amount is carried forward to the new account and amortized according to the updated schedule and terms.
    • Principal in arrears: This amount is transferred to a dedicated CarryForwardPrincipal in Arrears balance. This equates to principals from repayments that were in arrears at the time of the reschedule/refinance. It is not amortized on the new schedule and must be settled via custom repayments.
note

If the account is not in arrears at the time of rescheduling, the full current principal outstanding will be amortized on the schedule as there is no Principal in arrears.

Interest​

  • Regular interest accrued: Added to the first installment of the new loan. It is applied and charged on the first installment's due date.
  • Regular interest balance (applied): Carried forward to the CF Interest Balance. It is kept "off-schedule" and requires custom repayments.
  • Interest from arrears balance & Interest from arrears accrued: Mambu has the capability in regard to decouple interest from arrears. Based on the product configuration at the time of reschedule/refinance with carry-forward, this will be handled in different ways depending on the setup of the source and target products.
  • The following product configurations are supported. Each will have their specific way of dealing with the interest from arrears at the time of reschedule/refinance:
    • Decoupled -> Decoupled product
    • Non-decoupled -> Decoupled product
    • Decoupled -> non decoupled product
    • Non-decoupled -> non decoupled product

Fees​

  • Scheduled fees: Reclassified as Non-Scheduled Fee Balances on the new account.
  • Interest-bearing fees (IBF): The balance is preserved to continue interest accrual on the new account. Any unapplied accrued interest on fees should be applied manually before rescheduling to avoid loss.

Redraw Balance​

The Redraw Balance acts as a holding account for overpayments, reducing the interest-bearing principal.

  • Net balance calculation: Interest on the new loan is calculated on the Net Balance (Expected Principal - Redraw Balance).
  • Product mismatch: If you are rescheduling to a non-redraw product, the Principal Balance will automatically be reduced by the redraw amount.

How does the new loan work?​

Repayment schedule​

  • The first installment: Any "Interest Accrued" carried forward is included to the interest due in the first installment of the new loan.
  • Total Due adjustment: If the combined interest exceeds the planned installment amount (PMT), a new "Total Due" is calculated for that first installment.

Account state and arrears​

  • Days in Arrears: If the old loan was in arrears, the "Days in Arrears" count is carried forward.
  • Returning to good standing: The loan returns to an "Active" (non-arrears) state only once the Carried Forward Interest Balance and Principal in Arrears are paid in full.

Accounting and Ledger implications​

Mambu employs a Mirror Booking logic for all income transactions (Interest and Applied Fees) during a reschedule:

  • Reversal: The total accumulated interest/income on the original account is reversed.
  • Re-logging: The consolidated amount (Legacy Accrual + Current Day Accrual) is logged as a new entry on the target account.
  • Internal transfers: Principal and Redraw balance transfers are captured within a single "Transfer" transaction to maintain portfolio & Portfolio Control GL integrity.

Rules and validations​

  • Exclusive actions: You must choose exactly one action per balance: Carry Forward, Capitalize, or Write Off.
  • Backdating: Backdated reschedules/refinances are not permitted. The transfer date must be the current date.
  • Compound interest: If the new loan uses compound interest, carried-forward accrued interest is included in the balance for future interest-on-interest computations.