Definition
Accrual Period
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An interest accrual period refers to the period in which interest due on a home loan is calculated by the lender.
For example, if the accrual period is 1 year on a $200,000 mortgage at 6%, then the interest for the year would be $200,000 x 6%, which is equal to $12,000. If the accrual period is monthly, then the interest for the month would be $200,000 x 6%/12, which is equal to $1,000.
While it might seem immaterial to make a distinction between an interest accrual period of 1 year and 1 month since they pretty much come to the same conclusion, these loan structures can make a huge difference when it comes to redemptions, late payment fees, accrued interest, etc.
Also note that for line of credit, the interest accrual period would be on a daily basis.
The payment period on a home loan is not the same as the accrual period.
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