"I am perplexed at what appears to be a nomenclature problem that the mortgage industry has created with its definition of 'simple-interest mortgage.' Aren't most monthly payment mortgages simple interest?" They are, and I agree with you that the existing nomenclature can be confusing to borrowers. Two separate concepts are involved. One is a distinction between simple interest and compound interest. The second is a distinction between monthly and daily interest accrual periods. Borrowers who don't understand these distinctions may not manage their mortgage properly. Simple Interest vs. Compound Interest: "Simple interest" means that interest is not paid on interest. With "compound interest," interest is (or can be) paid on interest. The distinction is best understood in connec...
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