Odd Days Interest

Written By
Paul Tracy
Updated November 4, 2020

What is Odd Days Interest?

Odd days interest refers to interest earned on loans that close on any day other than the standard day the lender requires interest and principal payments.

How Does Odd Days Interest Work?

For example, let's assume that John obtains a mortgage from his bank, and the monthly interest and principal payments will be $2,500. The bank requires mortgagees to make their monthly interest and principal payments on the first of the month.

Due to the circumstances of the purchase of his house, John's mortgage is going to close on the 10th of June. He is therefore responsible for the interest that accrues for the rest of that month -- from June 11 to June 30. This amount totals $300. Most banks will either tack this odd days interest onto John's first interest and principal payment of $2,500, or they may require him to pay the $300 at closing.

Why Does Odd Days Interest Matter?

One of the important aspects of odd days interest is that the amount is usually unknown until the day the mortgage actually closes. For this reason, lenders often leave odd days interest off of the good faith estimates that they must provide to borrowers regarding lending expenses. Therefore, borrowers must be aware that they might have to come to the closing table with hundreds if not thousands more dollars than they originally expected, depending on the day their loans close.

Activate your free account to unlock our most valuable savings and money-making tips
  • 100% FREE
  • Exclusive money-making tips before we post them to the live site
  • Weekly insights and analysis from our financial experts
  • Free Report - 25 Ways to Save Hundreds on Your Monthly Expenses
  • Free Report - Eliminate Credit Card Debt with these 10 Simple Tricks
Ask an Expert
All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Odd Days Interest.
Be the first to ask a question

If you have a question about Odd Days Interest, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

If you have a question about Odd Days Interest, then please ask Paul.

Ask a question Read more from Paul
Paul Tracy - profile
Ask an Expert about Odd Days Interest

By submitting this form you agree with our Privacy Policy

Don't Know a Financial Term?
Search our library of 4,000+ terms