The formula
- P
- Principal or payoff balance
- r
- Annual interest rate
- B
- 360, 365, or 366 days
- d
- Days to accrue
Worked payoff example: $180,000 at 6.25%
Using a 365-day basis:
The per diem is about $30.82. If a payoff statement needs 10 additional days of interest, the simple accrued amount is about $308.22 before any fees or other adjustments.
Per diem interest on a mortgage payoff
A mortgage payoff often includes interest through a specified payoff date. Multiply the per-diem amount by the number of interest days required under the lender’s date-count convention, then add any other payoff items shown by the servicer.
Why the payoff quote can differ
Servicers can apply different through-dates, payment posting rules, escrow items, late charges, recording fees, or other amounts. The per-diem formula calculates interest only; it does not replace an official payoff statement.
Per diem vs. daily rate
The daily rate is a percentage per day. Per diem interest is the dollar amount per day. Multiply the daily rate by principal to convert the percentage into dollars.
Check the math with a calculator
Enter your own numbers in the matching Power of Interest calculator. The calculator performs the arithmetic while this page explains the formula and assumptions behind it.