1. What is Mortgage Per Diem Interest?

Per diem interest is the daily interest charged on a mortgage loan. It represents the amount of interest that accrues each day based on the annual interest rate and loan balance. This calculation is particularly important for understanding daily interest costs and for mortgage closing calculations.

2. How Does the Calculator Work?

The calculator uses the per diem formula:

Where:

• Annual Interest — Total annual interest amount in dollars
• 365 — Number of days in a year (some calculations use 360 days)

Explanation: This simple division calculates how much interest accrues daily on a mortgage loan.

3. Importance of Per Diem Calculation

Details: Per diem interest calculations are crucial for understanding daily borrowing costs, calculating mortgage payoffs, determining interest due at closing, and making informed decisions about extra mortgage payments.

4. Using the Calculator

Tips: Enter the total annual interest amount in dollars. The calculator will divide this amount by 365 to determine the daily interest cost.

5. Frequently Asked Questions (FAQ)

Q1: Why is per diem interest important at closing?
A: Lenders charge per diem interest from the closing date to the end of the month, as first mortgage payments typically begin the following month.

Q2: Do all lenders use 365 days for this calculation?
A: Most use 365 days, but some lenders may use 360 days. Always confirm with your lender which method they use.

Q3: How does per diem interest affect mortgage payoffs?
A: When paying off a mortgage, you'll need to pay the outstanding principal plus per diem interest through the payoff date.

Q4: Can per diem interest be deducted on taxes?
A: Mortgage interest, including per diem interest, is generally tax-deductible for qualifying loans, subject to IRS limitations.

Q5: Does per diem interest change over time?
A: Yes, as your principal balance decreases with each payment, the daily interest amount will also decrease accordingly.