This is a mortgage where interest is not paid for a period of time at the beginning of the mortgage term. When this period is over, the accumulated interest is added to the original loan. One method is to add the total giving a new loan figure and then calculating the interest payments using this figure. Another method is to calculate interest on the original loan amount and spreading the cost of the deferred interest over a period of time. If you choose the first method, you do end up paying interest on your deferred interest, making this an expensive option.