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Daily Interest Rate Formula:
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The daily mortgage interest rate is the interest charged on a mortgage loan calculated on a daily basis. It is derived by dividing the annual interest rate by 365 days, providing a more precise calculation for daily interest accrual.
The calculator uses the daily interest rate formula:
Where:
Explanation: This calculation converts the annual percentage rate into a daily rate, which is essential for accurate daily interest calculations on mortgage loans.
Details: Daily interest calculation is crucial for understanding how interest accrues on your mortgage, especially for variable rate mortgages, early repayments, or when calculating exact interest charges between payment dates.
Tips: Enter the annual interest rate in percentage format. The calculator will provide both the daily rate as a percentage and in decimal format for easy use in further calculations.
Q1: Why divide by 365 instead of 360?
A: Most modern mortgage calculations use 365 days for greater accuracy, though some financial institutions may use 360 days. Check with your lender for their specific method.
Q2: How is daily interest used in mortgage calculations?
A: Daily interest = (Loan balance × Daily rate) × Number of days. This helps calculate exact interest between payments or for partial periods.
Q3: Does this work for both fixed and variable rate mortgages?
A: Yes, the daily rate calculation applies to both types, though variable rates may change more frequently.
Q4: Why calculate the decimal format?
A: The decimal format (annual rate ÷ 100 ÷ 365) is typically used in mathematical calculations and programming applications.
Q5: How accurate is this calculation for actual mortgage payments?
A: This provides the basic daily rate. Actual mortgage calculations may include additional factors like compounding frequency and specific lender formulas.