How do They Calculate Our Home Loan Payment Amounts?

Written by James McDonald

July 5, 2007

So I had a call from my friendly Bank the other day. Which Bank? I’ll let you figure that out on your own.

Anyway, So they are saying `how am I liking my Home Loan etc etc’ and I’m like fine, fine it’s all going just peachy. Then I say however one things got me stumped. So they in their best customer service “How can I be helping You?” manner ask what it is, and I say…

“I want to know how you calculate my weekly loan repayments?”

“Well Sir”. They say. “It is based on your loan term, your loan amount, your interest rate and any fees and charges”.

So I say. “Yes I’m aware of that. But I would like to sit down with a pen and paper and work it out for myself so I can arrive at the same amount that is on my Loan Statement. So can you tell me what the calculation is that you use?”

“Well Sir”. They say. “It is based on your loan term, your loan amount, your interest rate and any fees and charges”.

At this point we digress into several minutes of the customer service person telling me the same thing in different ways but not really answering the fundamental question of “I want to know how you calculate my weekly loan repayments?”

The reason for me sticking on the point of wanting to know how it’s done is that I noticed an online advertisement for some software that says something to the effect ‘If we can’t find a bank error in your favour with our software we will give you your money back’. The site claimed that discrepancies of about 1200$ a year are fairly common. So it got me wondering if indeed my bank had stuck me with a miriad of fees that I couldn’t filter out by doing a simple calculation of how the interest is calculated and thereby identifying the cream so to speak in their favour.

In my experience with the customer service person we reached stalemate and then she put me on hold to ‘talk to her supervisor’. After some stirring Music on Hold she returned to say she would investigate and call me back…

Waiting, waiting…. Oh I get it. That was just a ploy to get me off the phone and out of their hair.

So to go forward from here I think I will be sitting down and trying to work it out for myself. I’m sure it’s just some type of compound interest formula plus the fees.

I wonder how many people are having my experience?

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