- Joined
- Sep 3, 2007
- Messages
- 39
I recently had a discussion with a banker at the Alberta Treasury Branch as to why the principal on one of my mortgages had increased from one month to the next.
Although she was less than confident with her answer and had to confirm with a senior colleague, she told me that ATB, unlike any other banks that I deal with, accrues the interest for 6 months and then charges that against the mortgage at the end of the 6 month period. (Every other bank I deal with has a straight forward approach whereby the mortgage payment is split between interest and principal and, each and every month, the principal owed is less than the month before.)
ATB claims, and I need to verify, that each month the entire mortgage payment goes toward reducing the principal and therefore the interest would need to be charged against the mortgage at the end of the 6 months. The banker said that this approach is actually better than what most banks do because the entire payment goes toward reducing the principal.
My question is: Does anyone know the math on this and whether this is a wash financially (as compared with what happens with most banks)? That is, are there hidden costs to this approach? And bottom line, does the ATB way of calculating actually benefit the customer or is one worse off with this approach?
I`d love to believe the banker and what "he said, she said" but I`ve dealt with the banks for tooooooo long .........
Cheers, and have a Great Day!
Although she was less than confident with her answer and had to confirm with a senior colleague, she told me that ATB, unlike any other banks that I deal with, accrues the interest for 6 months and then charges that against the mortgage at the end of the 6 month period. (Every other bank I deal with has a straight forward approach whereby the mortgage payment is split between interest and principal and, each and every month, the principal owed is less than the month before.)
ATB claims, and I need to verify, that each month the entire mortgage payment goes toward reducing the principal and therefore the interest would need to be charged against the mortgage at the end of the 6 months. The banker said that this approach is actually better than what most banks do because the entire payment goes toward reducing the principal.
My question is: Does anyone know the math on this and whether this is a wash financially (as compared with what happens with most banks)? That is, are there hidden costs to this approach? And bottom line, does the ATB way of calculating actually benefit the customer or is one worse off with this approach?
I`d love to believe the banker and what "he said, she said" but I`ve dealt with the banks for tooooooo long .........
Cheers, and have a Great Day!
