Mortgage/Loan Scheduled Transaction Way Off

[Mike or Penny Novack]

On 7/9/2017 5:33 AM, ITWarrior wrote:
> Hello,
>
> I have a problem with setting up a mortgage. By the time I've added the
> details and reach the 'Loan Review' page, the results are way off. Here are
> my values:
>
> Amount: 172,000
> Interest Rate: 4.590%
> Type: Fixed Rate
> Start date: 01/01/17
> Length: 30 years
>
> The PMT for this is calculated by gnucash as:
> pmt( 0.04590 / 12.00 : 360.00 : 172,000.00 : 0 : 0 )
>
> Loan payments are every two weeks on a Friday, starting 01/01/17.
>
> My bank calculates these bi-weekly repayments at ~$400, but gnucash shows
> the payments as $880. I could understand these being off a few dollars
> depending on how the interested is calculated (it's calculated daily here in
> NZ), but out by more than twice as much?
OK, first of all, the "more than twice as much" is obviously correct 
(you would expect a MONTHLY payment to be at least twice a BI-WEEKLY 
payment). And since 28 days (two biweekly payments) is less than a month 
you expect more (from that) and you are paying a total of less interest 
on the mortgage because of the more frequent adjusts downward of 
principle owed.

Michael D Novack

PS: But even once this is sorted (it will be either 782 or 783 payments 
depending on how your lender treats the end) do not expect an exact 
match between the bank and the gnucash calculator. This is NOT just a 
matter of how rounding is handled but other choices in figuring the 
amortization schedule.