Mortgage interest is calculated using either simple interest or compound interest, with compound interest being the more common method for residential mortgages.

Simple Interest:
– Calculated solely on the original loan amount over the loan term

Compound Interest:
– Considers both the original loan amount and accumulated interest from previous periods

Most mortgages use compound interest because it mirrors how interest accrues over time. Payments contribute to interest and principal reduction, with subsequent interest calculated on the decreasing principal.

Note: Mortgage interest calculations may vary; refer to your loan agreement or consult our team to help you understand the precise details.