A Guide from MC Customer Support
|
| Question | I hear the term Odd Days Interest. What does that mean? | |
| Answer A | Odd Days Interest are the number of days outside of amortization. Real estate loans are set up with the payment to be the first day of the month (except biweekly loans). Interest on real estate loans is ALWAYS paid in arrears. With a payment due on the first of the month, interest is paid for the 30 days prior. Amortization of the loan starts at that time. If you set up a loan with a closing date of the 17th of May, the first payment of P&I would be due July 1st. The payment made on July 1st pays the interest from June 1st to July 1st. The interest between May 17th and June 1st is outside of amortization and is called Odd Days Interest and collected at closing. | |
| Answer B | This also applies when a loan is paid off. If a loan is not paid off on the exact due date interest is computed to, then, the number of days become Odd Days Interest. You have the following two options: 1. If interest was paid to the first day of the month and the loan pays off any day during the next month, you can collect interest from the interest paid-to-date to the date the loan is being paid off. This is Odd Days Interest. 2. On some loans, you could have the option to collect interest beyond the day funds are received up to the first day of the next month. In this case, there would be no Odd Days Interest. | |
 |
"Odd Days Interest" is always computed on 365 days in a year. On real estate loans, interest during amortization is normally computed on 360-day year. The U.S. Supreme Court ruled that per annum on real estate loans can be 360 days in a year thus making it easier to compute 30 days interest for every month. |
Updated August 1, 2006 at 8:04 a.m.
