1. What is Per Diem Interest?

Per diem interest is the daily interest charged on a loan. It represents the amount of interest that accrues each day before regular payments begin, often used in mortgage loans during the period between closing and the first payment.

2. How Does the Calculator Work?

The calculator uses the per diem interest formula:

Where:

• \( Loan \) — Principal loan amount in USD
• \( Rate \) — Annual interest rate in decimal form
• 365 — Number of days in a year (some calculations use 360)

Explanation: The formula calculates how much interest accrues daily by dividing the annual interest by 365 days.

3. Importance of Per Diem Calculation

Details: Calculating per diem interest helps borrowers understand daily interest costs, especially important for short-term loans or during loan closing periods when interest accrues before regular payments begin.

4. Using the Calculator

Tips: Enter the loan amount in USD and the annual interest rate as a decimal (e.g., 5% = 0.05). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why is per diem interest important in mortgages?
A: It determines the interest charged between closing date and first payment, which is typically paid at closing.

Q2: Should I use 365 or 360 days?
A: Most calculations use 365, but some lenders use 360 days (which results in slightly higher daily interest). Check your loan terms.

Q3: How does per diem affect my closing costs?
A: The per diem interest from closing date to end of month is typically paid at closing as part of your prepaid items.

Q4: Can per diem be negative?
A: No, per diem interest is always a positive value as long as loan amount and rate are positive.

Q5: Is this the same as simple daily interest?
A: Yes, per diem interest is essentially simple interest calculated on a daily basis.