Compare Mortgage Quotes

Refinance Rates for Today

Please enable JavaScript for the best experience.

In the mean time, check out our refinance rates!

Company Loan Type APR Est. Pmt.

Mortgages are compunded semi annually

Posted on: 18th Apr, 2006 01:09 am
Most Canadian mortgages are compounded semi-annually. Can anyone explain what that exactly means? I know what compounding means when interests are accumulated.
Hi Candy

Basically when mortgage is compounded it's the true rate of interest. If any lender say that you are getting a rate of 6% compounded semi-annually then the actual rate which you are getting is
= [(1 + 0.06/2) ^2 -1] * 100
= 6.09% per annum

So, your monthly interest is calculated at a rate of 6.09%.

SJ
Posted on: 18th Apr, 2006 01:28 am
Could any one clarify me what mean here? I have an "accelerated biweekly" payment in which I need to make 26 payments a year, which is also what I would consider real biweekly.
Posted on: 19th Apr, 2006 08:57 pm
Hi man

Assume the monthly payment of $2000.
Then, Sum total of payments annually $24,000.

In case of
Regular Bi-Weekly Payment Option
Bi-weekly payment = (Monthly payment x 12) / 26
= ($2000 x12) /26
= $ 923

Total annual payment = $ 23,998

Accelerated Bi-Weekly Option
Bi-weekly payment amount = (Monthly payment /2)
= ($2000 / 2)
=$ 1000

Sum total of payments annually = $ 1,000 x 26 = $ 26,000

So, in the option "Accelerated Bi-weekly payment" you are making one extra month payment every year.

SJ
Posted on: 19th Apr, 2006 09:27 pm
Page loaded in 0.295 seconds.