VA Per Diem Interest Calculator

      Per Diem Interest Calculator  
 
 
 
 
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When you close or settle your loan, you will pay interest from the settlement date to the end of the month. Per diem interest is a fancy way of saying you pay interest per day or diem. If you close on the 15th day of the month, you will pay the lender 15 days of interest, assuming there are 30 days in the closing month. 

If you close on the last day of the month, you will pay the lender one day's interest. The calculation includes the closing day in the calculation.

Think of per diem interest at settlement as an interest-only mortgage payment.

Mortgage Per Diem Interest

Home buyers at closingMortgage Per Diem Interest is the daily interest charged on a mortgage loan. When a mortgage is taken out or refinanced, the borrower typically doesn't make a payment until the first of the following month. However, interest accrues daily, and the borrower is responsible for paying the interest for the number of days between the loan closing and the end of the current month.

This is known as the per diem interest, and it is calculated by multiplying the loan amount by the interest rate and then dividing that by 365 (or 360 in some cases) to get the daily interest rate. The per diem interest is added to the borrower's closing costs and is paid at the time of loan closing.

Per Diem Interest Calculation

The per diem interest formula is straightforward. Multiply the loan amount by the interest rate, then divide the total by 365 days. The result is the loan's per diem cost (per day interest). Now multiply the daily interest rate by the number of days in the settlement month. Here's an example of the calculation:

Loan Amount X Interest Rate = Total Interest Number of Days in a Year Daily Interest Cost Multiply by = The number of days owed Total per diem interest paid $100,000 3.00% $ 3,000 365 Days $ 8.22 X 16 Days = $ 131.51.

Loan Amount X Interest Rate = Total Interest Number of Days in a Year Daily Interest Cost Multiply by = The number of days owed Total per diem interest paid
$100,000 3.00% $ 3,000 365 Days $ 8.22 X 16 Days = $ 131.51

Can I Avoid the Per Diem Interest Charge?

It's unlikely that a lender will pass on the per diem interest cost.

How Per Diem Interest Impacts Your VA Loan

A VA loan is one of the most beneficial home financing options for veterans and active-duty military personnel. Its advantages include no down payment requirement, low-interest rates, and relaxed credit score requirements. However, many borrowers are unaware of how per diem interest affects their mortgage payments.

Per diem interest refers to the daily interest on your VA loan from the closing date until the end of the month. The amount of per diem interest you owe depends on the principal balance of your loan and its annual percentage rate (APR). Essentially, it's like making an interest-only mortgage payment before you make your first actual payment.

The impact of per diem interest can be significant – it may add hundreds or thousands of dollars to your closing costs.

Try Our Amortization Calculator

Use our amortization calculator and see how fast you can payoff your mortgage with an extra payment each month. A little extra with your mortgage payment can save you a ton of interest.

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