What is the typical compounding/amortized period on US mortgage loans
In a different question it is stated that
Mortgages are compounded .. 12 times a year in the USA
Is this true or just applicable to that question?
I am looking at a site where it explains how to convert APR to APY on basis of the type of compounding, and I am not getting the same number the bank is trying to offer. When I asked the loan officer what kind of compounding the loan has, they did not understand or pretended not to.
So the main question is do mortgages in the US offer monthly compounding or can they have daily/infinite compounding?
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Actually, mortgages do not "compound" at all. Compounding means that interest is charged on top of past interest, which is not true for mortgages. Conforming mortgages in the US use simple interest, where interest is calculated based on the principal amount remaining, and late/unpaid interest is not added to the principal (unlike a credit card, for example).
Mortgages are typically amortized based on 12 equal monthly payments (with some exceptions like bi-weekly or semi-monthly mortgages), and the periodic interest used to amortize the monthly payment would be 1/12 of the "annual" interest that is quoted.
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