Free Tool — MLO / NMLS Exam Prep
Per-Diem Interest Calculator
Mortgage payments are made in arrears, so at closing the lender collects interest for the days between funding and month-end. That daily figure is per-diem interest. Enter the loan, rate, and closing date to see the daily amount and the total prepaid interest — computed both the 360-day and 365-day way, since the NMLS exam tests both conventions.
Per-Diem & Prepaid Interest Calculator
Daily (per-diem) interest and the odd-days prepaid interest collected at closing — classic NMLS math.
Loan × Rate ÷ 360
Loan × Rate ÷ 365
Inclusive of the closing day
Per-diem (360-day) × odd days
1st of the second month — interest paid in arrears
Mortgage interest is paid in arrears. When a loan closes mid-month, the borrower prepays interest ("odd-days" or "interim" interest) from the closing date through the end of that month, then the first regular payment is due on the 1st of the following month — meaning the first payment is the 1st of the second month after closing.
For exam practice and estimation only — not a substitute for engineered design, manufacturer data, current codes, or a licensed professional's judgment. Verify all values before relying on them.
Worked Example
A $250,000 loan at 6% closes on the 20th of a 31-day month (12 days of interim interest, days 20–31 inclusive).
- • 360-day method: ($250,000 × 0.06) ÷ 360 = $41.67/day → × 12 days = $500.04 prepaid interest.
- • 365-day method: ($250,000 × 0.06) ÷ 365 = $41.10/day → × 12 days = $493.15 prepaid interest.
- • Close earlier in the month → more days → more prepaid interest due at the table. Close near month-end → less.
Exam takeaway: the 360-day method gives the higher daily amount. Always check which day-count the question specifies.
Per-Diem Interest — Frequently Asked Questions
What is per-diem interest?
Per-diem interest is the daily interest charge on a mortgage. At closing, the lender collects prepaid (or interim) interest from the day the loan funds through the last day of that month, because the first regular payment covers the following full month in arrears. Per-diem interest = daily interest rate × the number of days remaining in the closing month.
How do you calculate daily (per-diem) interest?
Daily interest = (Loan Amount × Annual Interest Rate) ÷ days in year. Using the 360-day method: ($200,000 × 0.06) ÷ 360 = $33.33/day. Using the 365-day method: ($200,000 × 0.06) ÷ 365 = $32.88/day. Multiply the daily figure by the number of days from funding to the end of the month to get the total prepaid interest collected at closing.
What is the difference between the 360-day and 365-day methods?
The 360-day method (the 'banker's' or 'ordinary' year) divides the annual interest by 360 and is the most common convention on the NMLS exam because it produces round monthly figures. The 365-day (or 'exact') method divides by the actual number of days in the year. The 360-day method yields a slightly higher daily amount. Always read the exam question to see which method it specifies.
Why is prepaid interest collected at closing?
Mortgage payments are made in arrears — each payment covers the interest that accrued the prior month. Because the first full payment is usually due on the first of the second month after closing, the days between the funding date and the end of the closing month would otherwise go uncharged. The lender collects that gap as prepaid (interim) interest at closing so no interest period is skipped.
Does the closing date affect how much per-diem interest is due?
Yes. Closing early in the month means more days remain until month-end, so more prepaid interest is collected. Closing near month-end means fewer days and less prepaid interest. Borrowers who want to minimize cash due at closing often schedule closings toward the end of the month — a common NMLS exam scenario.
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