Compounding interest is when interest is charged on top of itself . For example, most mortgages are compounded semi-annually. That means that every 6 months, interest is calculated at the current balance AND accrued interest to that point. Interest only mortgages are typically compounded monthly however some lenders have started compounding their standard (often variable rate) mortgages this way as well. The more frequently interest is compounded, the more interest you will pay in the long run. It is important to know the fine details of your mortgage so be sure to consult a Mortgage Broker for impartial advice! www.christinebuemann.ca