Question:

How to calculate the daily interest payment on a mortgage loan?

Answer:

Basically, calculating the daily interest payment is slightly different for compounding and simple interest, but let us consider the following example:

How do we calculate daily interest payment if we know the loan balance and the annual interest rate?

If you have a remaining mortgage loan balance of $167,788.56 at 6.25% effective annual rate (EAR), divide 6.25% by 12 to obtain the monthly rate, and then by 30 (assuming each month has 30 days) to obtain the daily interest rate.

Calculations assuming 360 days in a year for accounting purposes are as follows:

6.25% divided by 12 divided by 30 times $167,788.56 equals daily interest payment of approximately $29.13, or simple daily interest rate of 0.0174%.

That means, if you suddenly get rich and decide to pay off your mortgage by the 20th day of the current month, the amount due to the lender will be:

$167,788.56 + $29.13 x 20 = $167,788.56 + $582.60 = $168,371.16 to completely rid you of this mortgage debt.

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