Mortgages typically fall into two classes; [tag]simple interest[/tag] and compound interest: “Simple interest” means that interest is not paid on interest. With “[tag]compound interest[/tag]” mortgages, interest is paid on interest.

Borrowers can avoid confusion if they understand that a “simple-interest mortgage” is one that accrues interest daily, and should be managed differently than monthly accrual mortgages. With a daily accrual mortgage, every day that borrowers delay their payment results in the accrual of another day of interest.

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