Maryland Mortgage Interim Interest Regulation

A mortgage is a loan secured by real property. A lender charges interest on the unpaid balance, including the amount that accumulates in the interim, or in the time between the closing date and the end of the month. Maryland law regulates the maximum interest rate a lender can charge a borrower, which depends on the type of loan.

Definition

Interim interest is the interest that accumulates from the date of closing to the date covered by the first mortgage payment. For instance, if your mortgage closes on August 10, then the interim period is from August 10th to September 1. The first mortgage payment will due on October 1 and will cover the interest that accrues in September.

Calculation

The interim interest rate is the same as the agreed upon mortgage interest rate. The lender calculates the interim interest by breaking it down into a daily amount. The borrower pays the amount owed for interim interest at closing.

Regulations

Maryland law does not limit the interest rate a lender of can charge on a loan secured by residential real property. If the borrower signs a written agreement that specifies the rate of interest, the loan is secured by a first mortgage or a first deed of trust. The lender can charge any rate of simple interest on the unpaid principal balance of the loan. The law does not limit the interim interest rate.

References

• Michie's Legal Resources: Other Permitted Rates of Interest
• FindLaw: Maryland Interest Rates