Prepaid Interest Calculator

At closing, lenders collect per-diem interest from the closing date through the end of the month. This calculator shows exactly how much based on your loan, rate, and closing date.

Loan amount

Interest rate

Closing day of month

Days in closing month

Total prepaid interest

$943

collected at closing

Daily interest

$72.52

Days charged

closing day through end of month

How prepaid interest works

Mortgage interest is paid in arrears. Your first regular payment usually arrives in the second month after closing. To bridge the gap, the lender collects per-diem interest at closing covering the period from the closing date through the end of the closing month.

Closing later in the month means less prepaid interest at closing — but the same total interest paid over the loan. Some buyers time closings near month-end to reduce cash needed at closing, knowing the first regular payment hits sooner.

How to Use

Enter the loan amount and locked rate.
Enter the day of the month you'll close.
Enter the days in your closing month (28–31).
Read the prepaid interest amount — this lands in the prepaid section of your closing disclosure.

Frequently Asked Questions

Why do lenders collect prepaid interest?

Mortgage interest is paid in arrears. Your first regular monthly payment covers the prior month. To handle the partial month from closing to the start of the regular cycle, lenders collect per-diem interest at closing.

Does closing later in the month save money?

It reduces cash to close because fewer days of prepaid interest are collected. But the first full payment hits sooner. Total interest paid over the life of the loan is identical either way.

Is prepaid interest tax-deductible?

If you itemize, prepaid mortgage interest is generally deductible in the year paid (subject to current tax rules). It's reported on the year-end 1098 along with other interest.

What's a 365-day year vs 360-day year?

Most US residential lenders use 365 days for per-diem interest. Some commercial lenders use 360. The difference rounds to roughly 1.4% on the daily figure — not large, but worth confirming on your closing disclosure.