How does mortgage interest work?

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It seems like it’s calculated monthly.

So, ignoring early repayment fees, if I had 100k remaining on the capital balance of my mortgage but the interest rate is 5%, I can just pay 100k and the debt is settled?

You owe 100k + 5% interest per month, but because you settled the 100k you no longer need to be concerned about the interest balance?

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Interest is calculated daily, if your regular payment is on the first, an you want to pay it off on the fifteenth, you’re going to owe the 100k principal plus 15 days worth of interest. I just went through this, typically you’ll need to get a payoff amount from the bank.

If there are no early repayment penalties, you only pay the interest on the current principal. You can theoretically pay it off early. That’s what happens if you sell the house while you still have a mortgage. The proceeds of the sale pay off the principal first. It can also be a good strategy (if there are no early repayment penalties) to increase your payment (or even make an extra payment) in the first few years. Paying down the principal in the first year will save you a lot of money at the end of the mortgage.

Interest is calculated daily, charged monthly, typically. That’s is, if your interest is 5% on 100k, interest accumulates as 100,000*(0.05/365)=13.70/day until the monthly cycle ends and it charges to the mortgage. If no payment were made you balance is now 100411 and interest is now calculated on that, but of course your monthly payment should have come out to cover interest + principle so ideally your 100k balance is lower.

If you were to pay off the 100k, you would also need to payout the accumulated interest that hasn’t been charged yet, so 100k + 13.70/day. Additionally prepayment is typically 3 months interest but your bank or region may differ so 100k+(100k*(0.05/4))+13.70/day.

But wait, there is more. When you got a mortgage, the bank but a lein on your property that they now need to remove it and that costs money, this is the discharge fee.

So now 100k+(100k*(0.05/4))+13.70/day+discharge

But wait, now there is EVEN MOAR! However these fees are entirely dependant on region and personal situation. there may be registration fees, transfer fees, fees to change how your property tax is paid, a refund from accumulated property tax payments that bank is no longer paying on your behalf, etc. Because of this, when you go to payout your mortgage you typically need to order a statement first to get your final balance and your per diem interest.