What is an Interest Rate Differential? (IRD Calculation)
The interest rate differential is calculation method lenders will use to break your mortgage early if needed. Simply put, depending on how far you are in the term of your product, they will equate the “Interest Rate Difference” using the remaining balance on the term compared to current rates and the balance of interest owing. Be careful! Lenders are very crafty in their calculation methods and rarely disclose properly upfront how much it will cost you to break your mortgage. Many “low rate” products have the worst IRD calculation, costing you thousands! Watch this video for a good understanding.
Kyle Wilson is a Mortgage Broker and CEO of Pragmatic Developments Inc. Living in Kelowna British Columbia. His passion is finance, budgeting, technology, and educating clients on innovative tools and resources to create an efficient and stable financial environment. Go to pragmatic.onl and contact him for financing and business development advice!