In the context of mortgages, what does the term "compounded semi-annually" imply?

Compounded semi-annually indicates that the interest on a mortgage is calculated and added to the principal balance two times a year. This means that after every six months, the interest accrued during that period is added to the loan amount, and future interest calculations will then be based on this new total. This method of compounding can affect the total cost of borrowing, as it allows interest to earn further interest, resulting in more pronounced growth of the loan balance over time compared to less frequent compounding intervals. Understanding this concept is crucial for borrowers as it impacts their repayment amounts and overall mortgage costs.