IRD (Interest Rate Differential)

Real Estate

A penalty charged by lenders when you break a fixed-rate mortgage before the term ends. It is calculated as the difference between your original rate and the current rate for the remaining term, multiplied by your outstanding balance and time remaining. Can be tens of thousands of dollars - always calculate before breaking your mortgage.

Related Terms

Mortgage

A loan to buy a house where the house itself is the collateral. You typically pay it back over 25 years with interest. If you stop paying, the bank can take the house.

Mortgage Principal

The portion of your mortgage payment that actually pays down the loan amount (not interest). Early in your mortgage, most of your payment goes to interest. Later on, more goes to principal. Paying down principal builds equity in your home.

Home Equity

The portion of your home that you actually own. Calculated as home value minus what you still owe on the mortgage. If your house is worth $500,000 and you owe $300,000, you have $200,000 in equity.