# Per Diem interest-rate Calculator

The Latin phrase "per diem" means "for a day."

Naturally, when you add the term interest, you get per diem
interest, which is the amount of interest for one day.

The majority of mortgage lenders will charge you interest on a loan
from the settlement date until the end of the month.

For example, if you close on the first of the month, you will pay
interest on the loan from the first until the last day of the month.

If you close on your loan on the 15th day of the month, and the month
has 30 days, you will pay 15 days' interest on the loan.

And one more example . . . if you close on the last day of the month,
you will pay interest for one day, the day of closing. In most parts
of the country, you pay interest on the day of closing.

Use the per diem interest calculator to estimate your per diem interest
on your loan.

### Frequently Asked Questions About Per Diem Interest

**Q. Does paying mortgage early reduce interest?**

A. Interest is calculated on the principal balance. If you reduce
the loan amount, you will reduce the interest paid to the lender.

**Q.
How is prepaid interest calculated at closing?**

A.
The per diem formula is simple. Here's an example:

$100,000 (Loan amount) X 5% (interest-rate) = $5,000

Now divide the total interest cost by the number of days (i.e. 360
or 365). We'll use 365 days

$5,000/365 = $13.70 per day

Multiply the "per diem" by the number of days

**Q. Is the mortgage interest calculated daily or monthly?**

A. The interest on a mortgage is calculated daily.

**Q. Who pays prepaid interest?**

A. The borrower pays the per diem interest