Per-Diem Interest
Direct definition
Interest charged from the day your loan funds until the end of that month, collected at closing.
Written by the Vabasso Mortgage Editorial Team · Reviewed against agency and federal sources · Read our editorial policy for how we research and review mortgage content
Plain-English explanation
Because mortgages are paid in arrears, closing near month-end usually means less prepaid interest at closing.
Why it matters
Timing your closing date can materially change the cash you need to bring.
Where you may see it
- Closing Disclosure
- Settlement statement
- Loan Estimate
A real-world example
Closing on the 3rd of the month collects 27 days of per-diem interest; closing on the 28th collects only 2 days.
Educational and illustrative only
A common misunderstanding
Per-diem interest isn't a fee or penalty — it's simply interest for the partial month between funding and the first full payment cycle.
Ask Vabasso AI
This glossary provides general educational information. Mortgage terminology, qualification methods, forms, timelines, fees, program rules, and legal meanings may vary by lender, investor, loan program, property, occupancy, state, and transaction. Definitions do not represent loan approval, legal advice, tax advice, or a commitment to lend.
- Author
- Vabasso Mortgage Editorial Team
- Reviewed by
- Vabasso Mortgage Licensed Advisory Team
- Last reviewed
- July 30, 2026