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What is an Interest Rate Differential (IRD)?

April 26, 2017Differential Interest rate IRD

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What is an Interest Rate Differential (IRD)?

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In Canada lenders that charge a prepayment “penalty” for paying off the mortgage early use one of two methods. In Canada they charge a three month interest penalty or an IRD calculation, which ever is greater. An IRD is a method for compensating both the lender and the borrower for a premature ending of a mortgage agreement due to changing interest rates.