Re: interest rates

The important issue is what conventions are used for time and rate.

About 25 years ago I tried to get information on this from Canadian
banks. Some were cooperative. As I recall, the three that responded used
three DIFFERENT rules. This was for weekly payment mortgages.

In Canada, there is a little known law that prescribes that mortgage
interest be computed "annually or semi-annually, not in advance".
Moreover, if nominal annual rate is over 6%, the borrower must be
provided with a schedule of payments, or everything defaults to the
6% rate after the fact. There've been some interesting commercial
mortgage cases from the early 80s where rates were around 20% and the
schedule was not correct.

To get to monthly, weekly or daily mortgage payments, you have to know
how many periods there are. For monthly payments, we can use 6 months,
so the "working" rate is 100 * [(1 + nominal_rate/200)^(1/6) - 1 ]

Is everybody still there?

Weekly or daily? Well, there are, as I recall between 181 and 185 days
(I should check this, it's been a while) in a "half-year, depending on
the start date and whether one uses calendar "date". Or using days, one
has to decide when things end. Or 365/2 = 182/5. But 182.5/7 is a bit
more than 26 weeks, worse in leap years. Which is where the fun begins.

I'm not sure I want to put canned formulas into Gnumeric or any other
spreadsheet for this, and I would definitely like to see more transparent output for mortgage payments.

Of course, in the UK (or at least England as Scotland may have its own
rules) most mortgages are demand loans so use floating rates.


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