Loans - interest calculations?

Robert_Sterling_3

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MarkyMarkD

It isn't difficult at all.

But it isn't ((1.11^(1/365)-1) because interest might be calculated daily, but it is not compounded daily on any mortgage I've ever seen.

what normally happens is that it's calculated daily and compounded monthly.

Forget completely about APRs. The stated rate is the rate charged. So if it's 6% p.a., it's charged as 6%/365 per day. That is the interest you pay - 6%/365 * balance.

End of story.

Every redemption statement I've seen, shows the amount to redeem on a particular chosen date, and then a daily amount thereafter. The daily amount is the daily interest and that will remain accurate for the whole of the month up until interest is next capitalised or a payment is made, at which point it will change.

But why do you need a precise figure anyway? You simply redeem what's owed and get any surplus back from the solicitor doing the remortgage, or from the lender. It's not a big deal to be a few quid out.