1. What is Per Diem in Mortgages?

Per diem (Latin for "per day") in mortgages refers to the daily interest charge on a loan. It represents the amount of interest that accrues each day before your first mortgage payment is due.

2. How Does the Calculator Work?

The calculator uses the Per Diem formula:

Where:

• \( Loan \) — The principal loan amount in USD
• \( Rate \) — The annual interest rate in decimal form
• 365 — Number of days in a year (some lenders use 360)

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

3. Importance of Per Diem Calculation

Details: Knowing your per diem helps you understand daily interest costs, which is particularly important for closing cost calculations and when making prepayments.

4. Using the Calculator

Tips: Enter the loan amount in USD and the interest rate in decimal form (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 important at closing?
A: Per diem determines how much interest you'll pay from closing date until first payment, which is part of your closing costs.

Q2: Do all lenders use 365 days?
A: Most use 365, but some use 360 days which results in slightly higher daily interest.

Q3: How does per diem affect my first payment?
A: Your first payment includes interest from closing date through the end of that month, plus principal for the next month.

Q4: Can I reduce per diem costs?
A: Yes, by closing later in the month or making an immediate principal payment.

Q5: Is per diem tax deductible?
A: Mortgage interest is generally deductible, including per diem interest paid at closing.