Prepaid interest
Definition
Prepaid interest is daily interest collected at closing for the days between closing and the period covered by the first regular payment. It is one kind of prepaid item, not the whole prepaids category.
In plain English
Interest starts when the loan funds, not on the first payment due date. Closing often collects the interest for those in-between days. That collection is prepaid interest. Prepaids as a group can also include insurance and tax items paid in advance. Prepaid interest is only the interest piece.
Technical definition
CFPB’s key-terms heading for prepaid interest charges is PRIMARY. The Loan Estimate page is supporting context for how prepaid items appear at origination.
Why it matters
Cash-to-close reviews mix prepaid interest with the initial escrow deposit and other prepaids. The pages stay separate.
Related terms
Sources reviewed
12 CFR 1026.37
ObservedSeptember 4, 2026
Mortgage key terms
ObservedSeptember 4, 2026