Can someone explain a daily compounded mortgage to me?
I got a mortgage on 1/24/07. Bank said our first payment was due on 4/12. I have paid on time (early actually) every month and the first 2 months payments went entirely to interest. Every mortgage amortization calculator I’ve found says that SOMETHING should be applied to interest. When I called the bank (Wachovia), they said my interest is compounded daily.
Should I look to refinance somewhere else??
Tagged with: amortization • mortgage amortization calculator • wachovia
Filed under: Things To Consider When Refinancing
This explains how your interest rate works:
http://www.investopedia.com/terms/p/periodic_interest_rate.asp
The more frequently your interest is calculated the more you will pay in interest for any given rate. Say you have a 10% mortgage for $1,000 (to make the maths easy). Your interest is $100 if you did the calculation, and paid, once a year. However if you did the calculation and paid every month, you would end up paying $1,104.70 over the year — an effective annual interest rate of 10.47% You need to compare the effective annual interest rate (APR) when shopping for a new mortgage.