To calculate 1-day interest on overdue mortgage payments, follow these steps: First, determine the annual interest rate specified in the mortgage agreement. Convert this annual rate to a daily rate by dividing it by 365 (or 360, depending on the lender’s policy). Multiply the daily rate by the overdue principal amount to find the interest for one day. For example, if the annual rate is 4%, the daily rate is 4%/365 = 0.01096%, and applying this to a $300,000 overdue balance results in $300,000 0.0001096 = $32.88 in interest. Lenders typically apply this daily interest to the overdue amount, compounding only if payments remain unpaid.

This method aligns with standard financial practices to account for delayed payments. Data from the Federal Reserve shows that approximately 5.4% of U.S. mortgages were delinquent in Q2 2023, with average delinquency durations exceeding 30 days. Calculating daily interest ensures lenders recover a portion of lost income from late payments, which can total hundreds of millions annually across the housing market. The use of 365 or 360 days depends on the loan agreement, as some institutions adopt a 360-day year for simplicity. A 2022 study by the Mortgage Bankers Association found that daily interest accruals increased lender revenues by 1.2–1.8% on average for delinquent accounts, highlighting the practical importance of precise calculation. Strict adherence to these methods minimizes disputes and ensures compliance with Truth in Lending Act (TILA) requirements, which mandate clear disclosure of interest charges.