Calculate mortgage or loan payments and amortization table using both: the exact formula and the approximate formula used by some banks.
Compound interest is the only interest rate used in serious finances. It allows to compare products and to create competition. However, public mortgage quotas are calculated using A approximated formula (a mix between compound and simple interest). Apart from creating confusion, this makes mortgage interest rates to grow even greater when interest rates rise (as the approximation error gets larger).
In the old times, using the exact formula could be complex but, nowadays, even the phone on our pocket can calculate it. There is no excuse to continue using the approximated formula.
We are promoting a petition requesting to change the law to force the use of the formula applying the effective annual interest rate (the universal interest rate unit). Please, sign the petition at:
http://www.avaaz.org/en/petition/Bankers_and_lawmakers_Use_the_correct_formula_in_mortgages