Mortgage Per Diem & Prepaid Interest Calculator

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The lender’s closing disclosure and loan documents control the actual amount collected.

These calculators provide mathematical estimates for education and planning. Lender practices, loan documents, fees, timing, and rounding can change actual results.

Mortgage closing interest

Calculate Mortgage Per Diem and Prepaid Interest

Mortgage per diem is the dollar amount of mortgage interest that accrues for one day. At closing, a lender may collect interest for the partial month between the closing date and the beginning of the normal payment cycle.

Mortgage per diem = Mortgage balance × Annual rate ÷ Day-count basisPrepaid interest = Mortgage per diem × Number of interest days

What Is Prepaid Interest at Closing?

Prepaid interest is mortgage interest collected in advance for the short period between closing and the beginning of the regular mortgage payment cycle. It is not a separate interest rate or lender fee.

How Is Mortgage Per Diem Calculated?

Convert the annual note rate into a daily rate and apply it to the outstanding mortgage balance. For the general calculation, see the per diem interest formula.

How Many Days of Prepaid Interest Will I Pay?

The number of prepaid-interest days generally depends on the closing date and the date through which the lender collects interest. A closing earlier in the month normally produces more prepaid-interest days than a closing later in the month.

Does Closing Later in the Month Reduce Prepaid Interest?

Usually, because fewer days remain before month-end. That does not automatically make a later closing financially better; it mainly changes when interest is paid.

Mortgage Per Diem vs. Monthly Mortgage Interest

Mortgage per diem is a short-period daily-interest calculation. A normal mortgage payment is calculated under an amortization schedule and generally includes both principal and interest. Use the free amortization calculator when you need the complete payment schedule.

Mortgage Per Diem vs. Loan Payoff Per Diem

Mortgage per diem usually refers to prepaid interest around a closing. Payoff per diem is the additional daily interest used to extend a loan payoff through a target date. Use the Payoff Per Diem Calculator for payoff extensions.

What to Check on Your Closing Disclosure

The principal amount used for the interest calculation
The note rate rather than automatically using the disclosed APR
The lender’s day-count basis
Whether the closing date is included
The date through which prepaid interest is collected
Any lender-specific rounding or calculation rules

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Daily Interest & Per Diem Tools

Frequently Asked Questions About Mortgage Per Diem and Prepaid Interest

What is mortgage per diem interest?

Mortgage per diem is the dollar amount of mortgage interest that accrues for one day on the outstanding loan balance at the applicable note rate.

What is prepaid interest at closing?

Prepaid interest is mortgage interest collected for the partial period between closing and the beginning of the regular mortgage payment cycle.

How is prepaid mortgage interest calculated?

Calculate the mortgage interest per day and multiply it by the number of interest days being collected at closing. The lender’s documents determine the applicable dates and calculation method.

Does closing later in the month reduce prepaid interest?

Usually. Closing later in the month generally leaves fewer days for which prepaid interest is collected before month-end. Other transaction costs and timing considerations are separate.

Should the closing day be included when calculating prepaid interest?

It depends on the lender’s calculation and closing documents. This calculator lets you include or exclude the closing day so the estimate can match the applicable method.

Should I use the mortgage APR or the note rate?

Use the rate actually used by the lender to accrue interest on the principal. The disclosed APR can include other finance-charge effects and may differ from the mortgage note rate.

Is prepaid interest an extra closing fee?

Prepaid interest is generally interest attributable to the period the mortgage is outstanding before the normal payment cycle begins. It is separate from lender fees and other closing costs.