What does "calculated not in advance" mean in mortgage terms?

The term "calculated not in advance" refers to the method in which interest is computed based on the outstanding balance at the end of a specified interest period. In this context, it indicates that the lender does not determine the interest amount until the period has concluded, allowing the interest to be assessed only on the remaining principal at that time.

This approach contrasts with calculations that are made "in advance," where interest is estimated and charged upfront based on the principal at the beginning of the period. By calculating interest only at the end of the period, it reflects a real-time evaluation of the borrower's debt, providing a potentially fairer assessment of the interest owed based on the actual loan usage over time.

The other options involve different interpretations of how interest is calculated and do not accurately align with the specific meaning of "calculated not in advance." For instance, options related to fixed interest rates or pre-calculated interest do not address the timing of when the interest amount is determined in relation to the payment period.