Simple Interest - Definition

Simple Interest Mortgage refers to that mortgage , which comprises of daily calculation of borrowers rate of interest, depending upon the principal balance at the time of last payment.


1. Benefit of early payment- A borrower has a benefit of early mortgage payments since it is not credited on the due date.

2. High interest rate - A borrower is required to pay very high rate of interest on the amount due, unless he/she systematically make his/her monthly payments before the due date.

3. Daily interest calculation- Here, the interest rate calculation is done on the daily basis to obtain the interest due for the day.

4. Computation method- In this type, the interest is computed on the unpaid principal balance of home, as opposed to compounded interest.

5. Subject To Penalty- Here, borrowers pay interest/penalty for every day they are late. There is no facility for grace period.