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Daily Interest Formula:
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Daily interest calculation determines the amount of interest accrued on a mortgage principal each day. This helps borrowers understand how much interest they pay daily and how payments are applied to their mortgage balance.
The calculator uses the daily interest formula:
Where:
Explanation: The formula converts the annual interest rate to a daily rate by dividing by 365 days, then applies it to the principal amount.
Details: Understanding daily interest helps mortgage holders see how quickly interest accumulates, make informed decisions about extra payments, and comprehend how payments are allocated between principal and interest.
Tips: Enter the principal amount in currency units and the annual interest rate as a percentage. Both values must be positive numbers.
Q1: Why calculate daily interest on a mortgage?
A: Daily interest calculation helps borrowers understand how much interest accrues each day, which is particularly important for making extra payments or understanding payment allocation.
Q2: Does this calculator account for compound interest?
A: This calculation shows simple daily interest. Most mortgages compound interest daily, but the actual compounding calculation may be more complex.
Q3: What's the difference between daily and monthly interest?
A: Daily interest is calculated each day based on the current balance, while monthly interest is typically the sum of daily interest charges for that month.
Q4: How does daily interest affect mortgage payments?
A: The more frequently you make payments, the less interest accrues overall since you're reducing the principal balance more often.
Q5: Should I use 365 or 360 days for daily interest calculation?
A: Most mortgages use 365 days per year for interest calculation, but some lenders may use 360 days. Check your mortgage agreement for specific terms.