GNUCash and Canadian (Ontario) Mortgages

[Cam Ellison]

Mark Johnson wrote:
> I almost hate to say it: RTFM (Read the fine mortgage :-)  (Sorry, 
> couldn't resist.)
> 
> The way mine is written (Calgary, AB), the interest is added on every 
> six months, and then my payments go against the total.  Unfortunately, I 
> did not find my fine mortgage to be clearly written.  I had to spend an 
> hour or two with a spreadsheet trying different scenarios for 
> calculating the interest before I managed to get my interest calculation 
> agreeing with their total (within <$1) of what the mortgage said I would 
> pay.
> 
> I'm guessing from your post that your mortgage interest is calculated 
> differently.  I suspect you may need to calculate it outside of gnucash 
> too and manually enter it like I did.  Probably not the answer you were 
> hoping for....

Canadian mortgages are calculated "semi-annually, not in advance". 
American mortgages and most loans are calculated annually.  So, take the 
stated annual interest rate, divide it in two, and calculate 
accordingly.  On the face of it, it may not seem different, but we're 
dealing with compound interest here: the monthly rate calculated the 
Canadian way for a 6% mortgage is .493862%, done the American way it is 
.486755%.  I think it was invented by some enterprising banker who found 
a way to shave an extra few bucks off his unsuspecting customers.  On a 
$500,000 mortgage, the difference is $35.54 in the first month.

As far as I know, the only way to make a Canadian mortgage work in 
gnucash is to use the month (or other payment period) as the basic unit, 
and determine the rate for that period.  I haven't bothered with this 
for some time, but at one point simply determined the weekly rate, which 
I wrote into the memo field so it was handy.  Then, when I really had 
nothing better to do, I'd hand-bomb 3 or 4 months worth of weekly 
payments.  Not a very efficient use of my time, but I got pretty quick 
at it, and it was accurate.  I have better things to do with my time now.

Good luck - and use a spreadsheet.

Cheers

Cam


-- 
Cam Ellison, Ph.D. R.Psych. #1417

Cam Ellison & Associates Ltd.
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