1. What is Per Diem Interest?

Per diem interest is the daily interest charged on a mortgage loan. It's calculated based on the loan amount and annual interest rate, then divided by 365 days to determine the daily cost.

2. How Does the Calculator Work?

The calculator uses the per diem interest formula:

Where:

• \( Loan \) — Mortgage loan amount in USD
• \( Rate \) — Annual interest rate in decimal form
• 365 — Number of days in a year

Explanation: The formula calculates how much interest accrues each day on your mortgage loan.

3. Importance of Per Diem Calculation

Details: Knowing your per diem interest helps you understand daily loan costs, plan for closing date adjustments, and estimate prepayment savings.

4. Using the Calculator

Tips: Enter loan amount in USD, interest rate as a decimal (e.g., 0.05 for 5%). All values must be valid (loan > 0, rate between 0-1).

5. Frequently Asked Questions (FAQ)

Q1: Why is per diem interest important at closing?
A: Lenders charge per diem interest from closing date until first payment due date, so it affects your closing costs.

Q2: How does rate format affect calculation?
A: The calculator expects decimal format (5% = 0.05). Divide percentage by 100 to convert.

Q3: Does this account for leap years?
A: Standard calculations use 365 days. Some lenders may use 360 days for simplicity.

Q4: Can I use this for other loans?
A: Yes, it works for any simple interest loan calculation, though terms may vary.

Q5: How does per diem change with payments?
A: As principal decreases, daily interest decreases proportionally.