What is per diem interest?


Per diem means per day. When you’re talking about interest, it means daily interest. Per diem interest is used to calculate how much interest you owe the mortgage company when you close on your home.


It’s calculated starting with the day of closing. Here’s an example. Let’s say you took out a loan of $200,000 with an interest rate of 4% and you closed on the 15th day of the month. You multiply $200,000 by 4% to get $8,000.

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Divide $8,000 by 365 (days of the year) to get $21.92. Multiply $21.92 by how many days are left in the month (including the day of closing). If it’s 16 days, the per diem interest you would need to pay at closing would be $350.72.

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