Per-diem interest: the number on every closing statement
Mortgage interest accrues daily, and when you close mid-month you prepay interest from your closing date through month-end — that's the "prepaid interest" line on your Closing Disclosure. The math is simple: balance × rate ÷ 365 (some lenders use 360). On a $400,000 loan at 6.5%, that's about $71 a day — close on the 20th and you'll prepay roughly 10–11 days, or $730–$800. Closing late in the month shrinks that check; closing on the 1st maximizes it. Neither changes what the loan costs — it just moves your first payment date.
Daily vs. monthly interest — and why the basis matters
Your monthly interest is balance × rate ÷ 12 — the interest portion of next month's payment on a simple-interest mortgage. The daily figure divides the annual interest by 365 (the "365/365" basis) or by 360 ("360/365"), which quietly charges a hair more per day. The calculator above shows both bases so you can match any lender's numbers to the penny. It's also the fastest way to feel a loan's true weight: a $400,000 balance at 6.5% costs about $2,167 every month — $71 every single day — before a dime of principal.
Why did I prepay interest at closing?
Because interest is paid in arrears: your first regular payment covers the first full month after closing, so the partial month between closing day and month-end is collected up front as per-diem interest.
Is closing at the end of the month cheaper?
It lowers your cash due at closing (fewer per-diem days), not the cost of the loan. If cash-to-close is tight, a late-month closing helps; the tradeoff is your first payment comes sooner.