The quick read: Compare actual/360 and 30/360 interest by holding the principal balance, nominal annual rate, and payment assumptions constant while applying each note's day-count formula. Actual/360 counts actual elapsed days over a 360-day denominator; a monthly 30/360 arrangement generally assigns 30 days to a full month. Read stub-period rules separately before comparing closing or payoff amounts.
What does the day-count convention change?
The day-count convention changes the fraction of the stated annual rate charged for a period, so identical nominal rates and balances can produce different interest amounts. Identify the numerator, denominator, accrual dates, and principal used in the calculation. The quoted rate alone does not describe those mechanics or the total financing cost.
For a simple interest calculation on an unchanged balance, interest equals principal multiplied by annual rate multiplied by the applicable day-count fraction. An actual/360 fraction uses the actual number of accrual days divided by 360. A full-month 30/360 payment can use 30 divided by 360, subject to the actual note language.
The 250 Livingston loan agreement filed with the SEC, in Section 2.2(d), calculates interest using actual elapsed days and an annual rate divided by 360. That describes the filed contract's formula. It does not establish that all commercial loans, floating-rate loans, or lenders use that convention.
Numerator: The days counted under the agreement. Denominator: The contractual year basis. Principal: The balance to which the rate applies during the period.
Also distinguish accrual from billing. A note can define interest accrual and payment amounts in different provisions. An amortizing installment contains principal as well as interest. You need both the accrual formula and the payment schedule to understand the borrower cash flow; neither can safely be inferred from a label on the term sheet.
How do equal balances and rates compare across full months?
Equal balances and rates compare differently across full months when one note counts actual calendar days and another uses a fixed 30-day monthly fraction. Calculate both on the same unchanged balance before introducing principal payments or rate resets. Label the results as illustrative arithmetic, because a real note may add different period boundaries or other charges.
Illustrative full-month interest comparison — assumed unchanged $3,000,000 principal and 6.00% nominal annual rate
| Accrual period assumption | Actual/360 formula | Actual/360 interest | Full-month 30/360 interest | Difference: actual minus 30/360 |
|---|---|---|---|---|
| Accrual period assumption 28 actual days | Actual/360 formula $3,000,000 × 0.06 × 28 / 360 | Actual/360 interest $14,000 | Full-month 30/360 interest $15,000 | Difference: actual minus 30/360 −$1,000 |
| Accrual period assumption 30 actual days | Actual/360 formula $3,000,000 × 0.06 × 30 / 360 | Actual/360 interest $15,000 | Full-month 30/360 interest $15,000 | Difference: actual minus 30/360 No difference |
| Accrual period assumption 31 actual days | Actual/360 formula $3,000,000 × 0.06 × 31 / 360 | Actual/360 interest $15,500 | Full-month 30/360 interest $15,000 | Difference: actual minus 30/360 $500 |
Every figure in this table is an original hypothetical input or calculated output, not a loan offer or market rate. The actual/360 daily amount is $3,000,000 × 0.06 / 360 = $500. For the assumed full-month 30/360 arrangement, monthly interest is $3,000,000 × 0.06 × 30 / 360 = $15,000.
The shorter actual month produces less interest than the assumed fixed monthly amount; the longer actual month produces more. Do not use a single 31-day comparison to describe every payment month. Compare the entire expected holding period and the closing and payoff periods as well.
A useful lender question is whether the proposed monthly payment is a constant interest-only amount, a changing interest-only amount, or an amortizing installment. The calculation above isolates day count. It does not model an amortization schedule or prove which of two complete financing offers is cheaper.
How do you compare a full year without calling it APR?
Compare a full year by summing contractual interest over the actual calendar periods using the same unchanged balance and nominal rate, then divide that interest by principal for an arithmetic comparison. Do not label that result APR or a complete borrowing cost. Fees, payment timing, amortization, compounding, and other contractual provisions require separate analysis.
Using the same illustrative $3,000,000 balance and 6.00% nominal annual rate, actual/360 simple interest over 365 accrual days is $3,000,000 × 0.06 × 365 / 360 = $182,500. Twelve assumed full monthly 30/360 payments total 12 × $15,000 = $180,000. The difference is $2,500 under these unchanged-balance assumptions.
The ratio $182,500 / $3,000,000 equals about 6.0833%. This is a simple interest-to-principal ratio for the modeled period, not a regulated disclosure calculation or effective yield. For 366 actual accrual days, the same formula gives $183,000, a $3,000 difference from the modeled $180,000 annual total.
If you wanted equal modeled simple annual interest over 365 days, an actual/360 nominal rate would be 6.00% × 360 / 365, or approximately 5.9178%, against the assumed 6.00% monthly 30/360 rate. That is a mathematical normalization, not a requested lender rate or evidence that such an offer is available.
Use this normalization to understand a quote, then compare the actual projected cash flows. A smaller nominal-rate difference may still leave important differences in reserves, fees, prepayment terms, and required hedging. Keep those items visible instead of compressing every financing feature into one unsupported annual percentage.
Why do closing and payoff stub periods need separate calculations?
Closing and payoff stub periods need separate calculations because a note using one convention for full monthly periods can specify another convention for partial periods. Read the initial interest, payment date, and prepayment provisions together. A monthly 30/360 label does not determine the interest payable for every interval between funding and the first regular payment.
Two primary contract examples show the distinction. The EQRT 3327 Harrisburg note filed with the SEC uses actual days divided by 360 for the initial period and a 30-day fraction for subsequent monthly payments. The Hamilton Park Towers mortgage note filed with the SEC specifies monthly 30/360 but actual/365 for a partial month. These examples apply only to those contracts.
Illustrative stub example: Assume an unchanged $3,000,000 balance, 6.00% nominal annual rate, and 17 accrual days under the note's date boundaries. Actual/360 interest is $3,000,000 × 0.06 × 17 / 360 = $8,500. Actual/365 interest is $3,000,000 × 0.06 × 17 / 365 = $8,383.56 rounded to cents. The difference is $116.44.
The result depends on the agreed accrual days, not simply the number of dates highlighted in a calendar. Ask whether funding day is included, whether payoff day is included, and when receipt of funds stops accrual. Have the lender show the calculation on the actual planned dates and balance.
Do not automatically apply the initial stub rule to an early payoff. A note's prepayment provisions can specify their own interest treatment and additional amounts. Keep the stub calculation and any prepayment obligation separate in your comparison so the source of each closing or payoff deduction is clear.
What happens when principal or the rate changes during a period?
Principal or rate changes during a period require the calculation to be divided into intervals with the applicable balance, rate, and day count for each interval. Sum those interval amounts rather than applying the ending balance to the whole period. Ask the lender how payment dates, reset dates, and accrual boundaries interact in the actual schedule.
For actual/360 simple interest, the calculation can be expressed as the sum of each interval's principal × annual rate × actual days / 360. That method preserves a mid-period principal reduction or rate change. It remains subject to the note's treatment of effective dates and any different payment mechanics.
For an original illustrative extension, assume the balance is $3,000,000 for ten accrual days, then $2,700,000 for twenty days, with the assumed 6.00% rate unchanged. Interest is $3,000,000 × 0.06 × 10 / 360 = $5,000, plus $2,700,000 × 0.06 × 20 / 360 = $9,000, totaling $14,000. Using the ending balance for all thirty days would produce $13,500 and understate this modeled interest by $500.
Do not transplant that interval calculation into a 30/360 note without checking how partial repayments affect its billing. Ask for the actual revised schedule. An amortizing loan adds another layer: the payment allocation affects outstanding principal, which then affects later interest. Preserve the schedule's balances and contractual timing.
A loan sizing calculator can help frame principal and payment assumptions. The loan sizing tool is useful for organizing the financing decision, but a simplified calculator result does not replace the lender's note-specific accrual schedule or payoff calculation.
Which note clauses should you check before choosing an offer?
Check the interest calculation, accrual-period definition, payment provisions, initial-period language, principal allocation, rate resets, and prepayment treatment before choosing an offer on its nominal rate. Ask for a reproducible schedule using your intended dates and balance. Resolve any inconsistency between the term sheet label and the note's formula before signing.
Use a practical clause checklist: numerator and denominator; full-month convention; partial-month convention; first payment date; date inclusion and exclusion; treatment of holidays and delayed payment; principal changes; floating-rate reset timing; rounding; interest-only versus amortizing payment; and interest required upon prepayment. Have counsel interpret provisions that are ambiguous or conflict.
Request two sample calculations from each proposed lender: an ordinary full period and a closing stub on your expected funding date. Ask for the inputs, not just the answer. Then reproduce the arithmetic in a spreadsheet with formulas visible. Keep a note explaining any rounding difference so it is not mistaken for a financing fee.
Compare the financing purpose alongside the arithmetic. A predictable monthly payment might matter to your operating budget, while the total interest over the planned holding period matters to your cash needs. The term sheet glossary and commercial loan page provide context for the broader structure, without substituting for the actual note.
How do you ask for comparable financing terms?
Submit the actual property facts, requested proceeds and unresolved documentation questions for brokerage review so the financing discussion addresses your supported investment decision. YieldStack is a commercial mortgage brokerage. Identify the decision that needs written lender clarification before selecting terms.
Every credit decision is made by the lender; YieldStack arranges the introductions and negotiates on the borrower's side, and no loan, rate, or closing is guaranteed.
Identify the specific difference you need explained: actual/360 versus monthly 30/360, partial-period treatment, or a payment schedule that cannot be reproduced. Include the note excerpt and your calculation. That gives a broker a concrete term to clarify while keeping hypothetical arithmetic separate from a lender quote.
Submit your financing request for review.
The bottom line
Use the note's actual formula and compare the same balance, rate, and dates. Model full months, the full holding period, and partial periods separately. Day count can explain an interest difference, but the final financing comparison still needs the complete payment schedule and other contractual costs.