1. What is Per Diem Interest?

Per Diem Interest is the daily interest charged on a loan, typically calculated for the period between the closing date and the date when the first monthly payment is due.

2. How Does the Calculator Work?

The calculator uses the Per Diem Interest formula:

Where:

• \( P \) — Principal loan amount (USD)
• \( r \) — Annual interest rate (in decimal form)
• 365 — Number of days in a year

Explanation: The formula calculates how much interest accrues each day on a loan by dividing the annual interest by 365 days.

3. Importance of Per Diem Calculation

Details: Calculating per diem interest is crucial for understanding daily interest costs, especially during loan closing periods when regular payments haven't begun.

4. Using the Calculator

Tips: Enter the principal amount in USD and the annual interest rate in decimal form (e.g., 5% = 0.05). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: When is per diem interest typically charged?
A: Most commonly during mortgage closings, for the period between closing date and the first payment due date.

Q2: Is 365 always used, or do some lenders use 360?
A: Most use 365, but some commercial loans use 360-day years - check with your lender.

Q3: How does this differ from regular monthly interest?
A: Monthly interest is calculated over 30 days (typically), while per diem is the exact daily amount.

Q4: Can per diem interest be deducted on taxes?
A: Yes, per diem interest is generally tax-deductible like other mortgage interest.

Q5: Why is per diem important at closing?
A: It determines how much interest you'll need to prepay at closing to cover the period until first payment.