How should loan interest be prorated when closing on May 14, assuming a balance of $65,325 and an 8% annual interest rate?

To determine how loan interest should be prorated at closing on May 14, we first need to calculate the daily interest on the loan amount. The annual interest rate is 8%, which translates to a daily interest rate by dividing the annual rate by 365 days.

1. Calculate Daily Interest:

• Annual interest: $65,325 * 0.08 = $5,226

• Daily interest: $5,226 / 365 ≈ $14.33

2. Determine the Number of Days to be Prorated:

• The loan interest needs to be prorated from the closing date, May 14, through the end of the month (May 31). That gives us 18 days (from May 14 to May 31).

3. Calculate the Total Interest for the Prorated Days:

• Total prorated interest: $14.33 * 18 ≈ $258.00

4. Identify the Party Responsible for Prorating:

• Since the seller is responsible for the interest up to the closing date, that amount typically gets debited from them. The proration ensures that the buyer is only paying for the interest after