Mortgage Calculators

Understanding Compound Interest
The term compound interest is sometimes related to simple interest. Over a period of time however, the difference gradually becomes considerable.

This is because unpaid interest fees are in addition to the balance that is payable. The lender in effect is charged interest on the previous interest.

For example, if the credit card holder above chose not to make any payments, the interest would accumulate

Simple interest is approximately the same as compound interest over short periods of time, so frequent payments are the best (least expensive) payment strategy.

This is a very important consideration when considering Mortgage Refinancing

A problem with compound interest is that the resulting obligation can be difficult to interpret.
 
To simplify this problem, a common convention in economics is to disclose the interest rate as though the term were one year, with annual compounding, yielding the effective interest rate.
However, interest rates in lending are often quoted as nominal interest rates.