How this number is made
Short-term interest, including a per-diem on a mortgage payoff, is usually simple interest: the annual rate times the fraction of the year. This page uses a 365-day year. Some notes use 360. The difference over a few weeks is small next to a wrong principal.
- Days are the days interest will actually accrue. Ask the servicer if you are paying off a mortgage.
- The rate is the annual rate on that balance.
Formula
Interest = principal × rate × days ÷ 365.
Worked example
With the figures already in the form, simple interest is $80.55.
Questions
Why might the payoff quote differ?
The servicer may use 360 days, include a recording fee, or start the count on a different day.
Does this compound?
No. Over a few weeks, compounding daily would add almost nothing at ordinary rates.