How do you calculate per diem interest on a mortgage?

Per diem interest is calculated using the formula: (Loan Amount × Annual Interest Rate) ÷ Days in Year. For a $300,000 loan at 6.5% with 365 days: ($300,000 × 0.065) ÷ 365 = $53.42 per day. Total per diem = daily rate × number of days from closing through month-end.

How many days of per diem interest will I pay at closing?

You pay per diem interest from your closing date through the end of the month. Close on the 15th = 17 days (15th through 31st). Close on the 25th = 7 days. Closing near month-end reduces your per diem interest charges significantly.

Does using 360 vs 365 days affect my per diem interest?

Yes. A 360-day year produces a slightly higher daily rate than a 365-day year. For a $300,000 loan at 6.5%: 360-day = $54.17/day, 365-day = $53.42/day. Always check which convention your lender uses.

Is per diem interest included in my closing costs?

Yes, per diem interest appears as a charge on your Closing Disclosure (CD) and is collected at closing. It's part of your total cash needed to close. The amount depends on your loan amount, interest rate, and closing date.

When does my first mortgage payment start after closing?

Your first regular mortgage payment is typically due on the first day of the second month after closing. If you close in January, your first payment is usually due March 1st. Per diem interest covers interest from January closing through February.

Can I reduce per diem interest by choosing my closing date?

Yes. Closing late in the month reduces per diem charges because there are fewer days between closing and month-end. Many buyers strategically schedule closings for the last week of the month to minimize this cost.

Per Diem Interest Calculator

Calculate the daily interest on your mortgage with this calculator. This is useful for determining exact interest owed for early payoff or mid-month closings. For a complete overview of conventional loan options, see our main guide.

Loan Amount ($)

Interest Rate (%)

Closing Date

Days in Year

Click the number to change the year

Per Diem Interest: This is the daily interest charged from your closing date until the end of the month. It's collected at closing and covers the gap between when you receive the loan and when regular payments begin. Formula: (Loan Amount × Interest Rate ÷ Days in Year) × Days Charged. To understand all your closing costs, review seller concessions and other options to reduce out-of-pocket expenses.

What Is Per Diem Interest on a Mortgage?

Per diem interest is the daily interest charge on your mortgage loan. It represents the amount of interest that accrues each day between your loan closing date and your first official mortgage payment. Understanding per diem interest helps you anticipate closing costs and see exactly how much you owe for the days you own the home before the loan term officially begins.

For more on today's mortgage rates, check our daily updates.

How Per Diem Interest Works

When you close on a mortgage, your loan funds transfer to the seller, but your first regular monthly payment is not due for a full month. The lender still charges interest during this gap. Per diem interest fills that gap by calculating what you owe on a daily basis.

Example: If you close on the 15th of a month, your first mortgage payment might not be due until the 1st of the following month. Per diem interest covers those 17 days. The lender adds this daily interest charge to your closing costs, and you pay it at the closing table.

Understanding how to calculate per diem interest ensures you can verify closing charges accurately.

Per Diem Interest Formula

Calculating per diem interest uses a straightforward formula:

Per Diem Interest = (Loan Amount × Interest Rate) ÷ Days in Year

Example Calculation

Assume you borrow $300,000 at 6.5% interest and close on the 15th of the month.

Step 1: Daily rate = ($300,000 × 0.065) ÷ 365 = $53.42 per day
Step 2: Days charged = 17 (15th through 31st)
Step 3: Total per diem = $53.42 × 17 = $907.14

Use our per diem interest calculator to estimate your specific charge.

When Per Diem Interest Appears

Per diem interest always shows up on your Closing Disclosure, the final document provided three days before closing. Most lenders collect this charge at closing and include it in your total cash needed to close.

Some sellers help cover per diem interest as part of seller concessions, though this varies by market and negotiating position.

Does Your Closing Date Matter?

Yes - significantly. Closing early in a month means more days until your first payment, so more per diem interest. Closing late in the month means fewer days of per diem charges.

Real-World Example

Close on the 5th: Pay 27 days of per diem interest
Close on the 15th: Pay 17 days of per diem interest
Close on the 25th: Pay 7 days of per diem interest

Some buyers strategically close near month-end to reduce this cost. Review our conventional loan Q&A for more closing strategies.

Per Diem Interest vs. Your Regular Payment

Per diem interest is separate from your monthly mortgage payment. Your regular payment begins the month after closing and includes:

Principal
Interest
Taxes
Insurance
Mortgage insurance (if applicable)

Per diem interest is a one-time charge that appears only at closing. Understanding mortgage escrow accounts helps you understand other components of your monthly payment.

Why Understanding Per Diem Interest Matters

Knowing how per diem interest works helps you:

Budget accurately for closing costs
Choose an optimal closing date to minimize costs
Review your Closing Disclosure with confidence
Compare lender estimates effectively
Avoid surprises at the closing table

For a complete list of planning tools, visit our mortgage calculators hub.

Frequently Asked Questions About Per Diem Interest

What happens if I close on the last day of the month?

You'll pay only 1 day of per diem interest, which can save you hundreds of dollars compared to closing mid-month.

Can per diem interest change after closing?

No. The per diem interest amount is fixed at closing based on your loan amount, interest rate, and closing date.

Do all lenders charge per diem interest?

Yes. All mortgage lenders charge per diem interest to cover the gap between closing and your first payment.

Key Takeaway: Per diem interest is a normal closing cost that reflects the daily interest your lender charges between closing and your first payment. By understanding how it works and how to calculate it, you can review your Closing Disclosure with confidence and know exactly what you owe on settlement day.