Originally Posted by
ashedfc
It all depends on the compounding of your mortgage... annual, semi-annual, quarterly, bimonthly, monthly or daily....What is the compounding period?
Lets say its semi-annually, than even if you pay down extra towards your principal, the lender will still apply interest for the entire 6 months (as if no extra principal was paid). The new principal amount is taken into consideration only after 6 months is over, & a new 6 months (semi-annual) calculation starts.
That's why mortgages which have daily interest compounding is beneficial, because with daily compounding, the interest only applied towards daily outstanding balance. The principal is effectively reduced the moment you make any principal payment..