What is Per Diem Interest?

Per diem interest is daily interest that is charged for a partial month's mortgage payment. This interest covers the period between the day you close on your home and the last day of the month. It is the interest that you pay when you close your loan, before your lender takes over the note and begins servicing your mortgage.

How to Calculate Per Diem Interest

For the sake of simplicity, we'll assume that your mortgage is $100,000 and your loan rate is 6 ½ % so we would take the following formula (100.000 x .065/12) and come up with $541.66 per month interest. If you closed on March 20, 2009 then you would pay per diem interest of $18.06 per day or $198.66 (11 days x $18.06 per day) at closing and then your first house payment would be June 1, 2009. The per diem interest payment is an interest payment made on the money loaned to you before the payments actually begin.

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