Cumulative Interest

Cumulative interest is the sum of all interest paid on a loan at a point in time, or for the full term.

When reviewing mortgages for comparison, cumulative interest over the entire life of the loans will be able to show a borrower how much actual interest it will cost a borrower in real dollars.

However, be mindful that it is most accurate with amortization schedules on a fixed rate loan.

Because of one cannot know with certainty what interest rates will be in future for adjustable rate loans, cumulative interest will not be precise enough to depend on.

Whatever the case, interest costs is a better way to judge the cost of a loan.

When doing an annual review on a home loan, cumulative interest would show the borrower how much interest has been paid at that point in time.

This can be a factor to help the borrower evaluate whether it is worthwhile to refinance.