1. What is Daily Interest Calculation?

Daily interest calculation determines the amount of interest that accrues each day on a mortgage balance. This helps borrowers understand how much interest they pay daily and how payments are applied to principal vs. interest.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( Principal \) — Current mortgage balance in dollars
• \( APR \) — Annual Percentage Rate expressed as a decimal (e.g., 0.05 for 5%)
• \( 365 \) — Number of days in a year

Explanation: The formula divides the annual interest rate by 365 to get the daily rate, then multiplies by the principal to calculate daily interest accrual.

3. Importance of Daily Interest Calculation

Details: Understanding daily interest helps borrowers make informed decisions about extra payments, see how interest compounds, and track how much of their payment goes toward interest vs. principal reduction.

4. Using the Calculator

Tips: Enter the current mortgage principal balance and the APR as a decimal (divide percentage by 100). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: Most modern mortgages use actual/365 day count convention, though some may use 360. Check your mortgage documents for the exact method.

Q2: Does this account for compounding?
A: This calculates simple daily interest. Actual mortgage interest typically compounds, but this gives you the daily accrual amount.

Q3: How accurate is this calculation?
A: This provides a close estimate of daily interest. Actual calculations may vary based on specific mortgage terms and payment dates.

Q4: Can I use this for other types of loans?
A: Yes, this formula works for any loan that accrues interest daily, including personal loans, auto loans, and credit cards.

Q5: Why is daily interest important?
A: It helps you understand the true cost of borrowing and shows how making extra payments can reduce your total interest paid over the loan term.