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A simple-interest mortgage is a type of mortgage where interest is calculated on a daily basis. This calculation is very different from a traditional mortgage. A regular mortgage calculates the interest on a monthly basis.
Impact
Calculating the interest in this manner can impact you in a few ways. For example, if you just continue to make your payments, the interest is going to be a little bit higher than what you would have to pay with a regular mortgage. However, if you get in the habit of making additional payments or larger payments, it is actually going to reduce the amount of interest that you pay when compared to a traditional mortgage. Since the interest is recalculated everyday, the extra money that you pay will be applied to the principal immediately.
Another way that this type of mortgage can affect you is the grace period. An interest only mortgage usually does not offer a grace period for your payments. You have to make the payment by the due date, or it will be considered late. Be sure to weigh your options carefully before you take a mortgage like this.
