How to Calculate Mortgage Prorations

Prorating the interest is common when you assume a mortgage from a seller.

Prorating the interest is common when you assume a mortgage from a seller.

When it comes to mortgage interest, chances are you'll have to prorate the cost for the first month of the mortgage. Mortgage prorations commonly occur when you're buying a home and assuming the seller's mortgage. Since home sales don't always fall nicely on the mortgage payment due date, you split the mortgage interest expense with the seller for the month of the sale. Prorating correctly ensures that both the buyer and the seller pay their fair share.

Divide the cost by the number of days in the cost period to find the cost per day. For example, say you are prorating the $600 of interest for the month and you fall in a month with 30 days. Divide $600 by 30 to get a cost of $20 per day.

Count the number of days that the cost applies to each party. For example, say you're buying a home and assuming the seller's mortgage on the 20th day of the month. Since you'll be in the home from the 20th through the 30th, you're responsible for the interest for the last 11 days, and the seller is responsible for the first 19 days.

Multiply the number of days that each party is responsible for by the cost per day to calculate the mortgage interest proration. In this example, multiply 11 by $20 to find that you owe $220 of interest for the month. Then, multiply 19 by $20 to find the seller owes $380 of interest for the month.

Tip

  • You are also likely to prorate other costs besides your mortgage, such as homeowner's association fee dues and property taxes.
 

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