PUB 936 mentions average balance. however, there are many acceptable ways (most not in the PUB of computing average balance)
To calculate the average mortgage balance, you can use the following methods:
Monthly Balances Method: Add up all the monthly balances for the mortgage and divide by the number of months in the period you are considering.
*
First and Last Balance Method: Add the first balance and the last balance, then divide by 2.
*
Interest Paid Method: Divide the total interest paid during the period by the interest rate to estimate the average balance.
*
Daily Balance Method: Sum the outstanding balance of the mortgage for each day of the period and divide by the number of days in that period.
*
i seen some others - this was in some pro software some years back
balances at beginning and end of month divided by 2. Sum all 12 months and the divide by 12
* for first home I suppose taking the monthly balances before the monthly payment (that's what you're paying interest on) and use the April balance before the payoff and divide by 4. do the same for the new home and divided by 9. add the two together.
