To calculate per diem interest, divide your annual interest rate (as a decimal) by the number of days in the year your lender uses — 365 or 360 — and multiply the result by your current principal balance. That gives you the dollar amount of interest that accrues on your loan each day. On a $250,000 balance at 6% using a 365-day year, the daily interest is about $41.10.
What You Need Before You Start
Three inputs drive the whole calculation.
- Current principal balance. The remaining amount you owe, not counting accrued interest or fees. Your latest statement or online account shows it.
- Annual interest rate. The rate in your loan agreement, expressed as a percentage. You’ll convert it to a decimal (6% becomes 0.06).
- Day-count convention. Whether your lender uses a 365-day year or a 360-day year. Look in the promissory note under a heading such as “interest accrual” or “calculation of interest.”
Lenders are required to disclose the interest rate and how charges are calculated under the Truth in Lending Act, implemented through Regulation Z.1eCFR. 12 CFR 1026.5 – General Disclosure Requirements If you can’t find one of these three figures, your loan servicer must provide it.
365-Day vs. 360-Day Year
The day-count convention decides how the annual rate gets sliced into daily pieces, and it changes your answer.
A 365-day year (sometimes called actual/365) divides the annual rate by the actual number of calendar days in the year. Most residential mortgage lenders use this method. A 360-day year (sometimes called 30/360) assumes twelve months of exactly 30 days each. Commercial lenders lean toward this approach because it makes each month’s interest an equal share.
The 360-day method produces a slightly higher daily charge, because you’re dividing the same annual rate by a smaller number. On a 6% loan, the daily factor is 0.00016438 under a 365-day year and 0.00016667 under a 360-day year. On a $250,000 balance, that’s a difference of about $0.57 a day, or roughly $17 over a month. Small, but real, and worth confirming so your numbers match the lender’s.
The Formula, Step by Step
The calculation has two steps.
Step 1. Find your daily interest factor. Divide the annual interest rate (as a decimal) by 365 or 360.
- 6% on a 365-day year: 0.06 ÷ 365 = 0.00016438
- 6% on a 360-day year: 0.06 ÷ 360 = 0.00016667
Step 2. Multiply the factor by your current principal balance.
- $250,000 × 0.00016438 = about $41.10 per day (365-day year)
- $250,000 × 0.00016667 = about $41.67 per day (360-day year)
That figure is your per diem interest. To find the total interest for any stretch of time, multiply the daily amount by the number of days in the period. If 15 days have passed since your last payment at $41.10 a day, the accrued interest is $41.10 × 15 = $616.50.
A Note on Rounding
Lenders aren’t required to carry the daily factor to any particular number of decimal places. Federal rules allow rounding as long as the annualized rate stays within one-eighth of one percentage point of the exact figure.2Consumer Financial Protection Bureau. Comment for 1026.14 – Determination of Annual Percentage Rate Most lenders carry it to six or eight decimal places in practice. If your figure and the lender’s differ by a penny or two, rounding is almost always why.
When the Balance Changes, Recalculate
Your per diem amount holds steady only as long as the principal balance holds steady. Any scheduled payment, extra payment, or new draw on a line of credit changes the balance, and the daily interest changes with it. After each principal change, run the formula again using the new balance.
How much the balance moves depends on the loan type. On a simple-interest loan — common for auto loans and some personal loans — the daily charge tracks the current principal directly, so an extra payment cuts tomorrow’s interest immediately. Most mortgages follow an amortization schedule instead: your monthly payment is fixed, but early in the loan a larger share of each payment goes to interest and a smaller share to principal, with the split slowly reversing over time. The per diem formula still works; you just need to know the current balance, which shifts a little with each payment.
Where This Number Actually Matters
Two situations turn per diem interest from a formula into real money: mortgage closings and loan payoffs.
At Closing
Nearly every mortgage in the United States collects interest in arrears, meaning each monthly payment covers the interest that piled up during the previous month. When you buy a home, the lender collects prepaid interest at closing to bridge the gap between the funding date and the end of that month. Close on October 17, and you’ll pay per diem interest for October 17 through October 31 at the settlement table. Your first regular payment comes due December 1 and covers November.
The prepaid interest charge appears on both the Loan Estimate and the Closing Disclosure under “Prepaids.” Federal rules require the lender to show the per diem dollar amount, the number of days, and the interest rate on a single line — for example, “Prepaid Interest ($27.40 per day for 14 days @ 4.00%).”3eCFR. 12 CFR 1026.37 – Content of Disclosures for Certain Mortgage Transactions (Loan Estimate) Multiply the stated per diem by the stated number of days, and you should land on the same total the lender shows.
At Payoff
When you pay off a mortgage, the servicer issues a payoff statement showing what you owe as of a specific date. Every payoff statement carries a “good-through” date — the last day the quoted total is valid, usually 7 to 30 days out. If your funds arrive after that date, extra per diem interest has accrued and the quoted amount will fall short.
Most statements list the daily interest amount so you can adjust the total yourself. If the good-through date passes and your payoff arrives four days later, add four times the per diem figure to the quoted amount. When timing is uncertain, build in a few extra days of interest and confirm the revised total with your servicer before wiring funds.
For a mid-month payoff, count the days between your last payment and the date the servicer will receive the funds. Some lenders include the receipt date in the count and some don’t, so check the payoff statement or ask. Multiply the per diem by the correct number of days, add that to the principal and any fees, and you have the payoff total.