WTF is per diem interest?
Per diem interest is the dollar amount you pay in interest on your mortgage per day.
This is how it is calculated.
One way is to take your interest rate, divide it by 365 and multiply it by the principal balance of your mortgage.
An example:
3% interest rate for a $300,000 mortgage is .03/365 x 300,000 or $24.66 per day.
Another way is to calculate the yearly interest on your mortgage and divide that by 365.
For instance:
3% interest rate for a $300,000 mortgage is 300,000 x .03 or $9000 in yearly interest dollars. Now divide the $9000 by 365 to get the per diem interest. 9000 / 365 = $24.66.
Per diem interest is expressed as a dollar amount.
When is it used?
At the closing of your mortgage, it’s used to calculate the amount of interest collected. This amount will cover the interest to the lender from the day of the closing (or funding if a refinance) to the end of that month. If you are closing or funding your new loan on June 15th, you will pay 16 days of interest (including the 15th and the 30th of June).
Essentially your first mortgage payment on your new loan is an interest only payment from the day of…
