# Compond Semi-Annual vs. Simple Monthly interest - Which charges more interest?



## latebuyer (Nov 15, 2015)

i am wondering which way I would pay more interest - if my mortgage was as a mortgage (compound semi-annual) or as a heloc (monthly simple interest)

This site

http://financialhealthblog.blogspot.ca/2009/05/mortgage-vs-heloc-compound-vs-simple.html

suggests in a heloc you'd pay less, but someone else suggested you pay more if it is calculated monthly in a heloc. 

Are there any mathematicians here who know?


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## latebuyer (Nov 15, 2015)

I found this site and it looks like compound annual would charge more interest

https://www.basic-mathematics.com/simple-vs-compound-interest.html


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## crooked beat (Jan 19, 2011)

That is an effective annual interest rate question: Calculate how much interest you would pay at the end of one year and then compare.

https://en.wikipedia.org/wiki/Effective_interest_rate

A similar comparison: https://www.investopedia.com/terms/e/effectiveinterest.asp


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## craiggsmith (Mar 23, 2018)

As per me I found by calculating imaginary value that you have to pay more by simple monthly interest rather than semi annual compound . So if you are taking any loan you should go with compound interest.


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## twa2w (Mar 5, 2016)

Mortgages are normally quoted as interest calculated semiannually, not in advance.
If your mortgage rate is 3% and your simple interest HELOC is 3%, you will pay more interest on the HELOC, all other things being equal.

When you get your HELOC, it will have section for the interest rate, normally at Prime + something. There will also be a line that quotes the equivelant semi-annual not in advance rate. This will show a higher figure as semiannual interest is cheaper.

Cheers


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