What Does Simple-Interest Mortgage Mean?
A mortgage where interest is calculated on a daily basis, as opposed to a traditional mortgage where interest is calculated on a monthly basis. On a simple-interest mortgage, the daily interest charge is calculated by dividing the interest rate by 365 days, and then multiplying that number by the outstanding mortgage balance. If you multiply the daily interest charge by the number of days in the month, you will get the monthly interest charge. Because the total number of days counted in a simple-interest mortgage calculation is greater than a traditional mortgage calculation, the total interest paid on a simple interest mortgage will be slightly larger than a traditional mortgage.
