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Are there any home-loans that compound every quarter or half-year or annually?

Asking for a friend who keeps bugging my other friend to give them money to buy a house, and the friend doesn't want to lose money off interest, so they want someone else to give them money, but I am not stupid enough to not realize that if they could obtain a loan that compounds every year rather than every month, sell their house before the loan compounds and pay zero interest.

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    And I'm sure banks aren't stupid enough to give out interest-free loans.
    – glibdud
    Commented Aug 11, 2022 at 1:30
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    I think then the interest is due up to the time where the loan is paid off. As would be with monthly compounding: if you pay it off on the 15th, you owe the interest of half of the month.
    – glglgl
    Commented Aug 11, 2022 at 8:24
  • Ask the "friend" what they're going to give you instead of interest Commented Aug 11, 2022 at 22:24

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I don't know of any mortgages that compound quarterly or annually, but you're talking about accruing interest, not compounding. Every mortgage I've had (as well as car loans) accrue interest daily, which means that if you pay off a loan in the middle of a compounding period, you pay for a pro-rated amount of interest up to that payment. For example, if your loan compounds on the 1st of each month and you pay it off on the 20th, you pay for 20 days of interest, not the full month.

So your concern about getting a loan that compounds once a year and paying it off early, paying no interest, isn't how loans work in reality. They would still pay interest for the number of days that the loan was outstanding (typically calculated as an average daily balance).

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