Interest Rate Differential

Sam · Posted: Wed Jul 07, 2004 10:44 pm Post subject: Interest Rate Differential

Interest Rate Differential is a type of compensation, which ischarged by the lender if the borrower pays off his mortgage principal prior to the maturity date. It is also known as:

Loss of interest
IRD.
Differential interest rate.

Features of Interest Rate Differential:

Interest Rate Swap - It is an interest rate swap which is in a 'penalty form'.
Early Prepayment Penalty - It is a prepayment penalty to the borrower for early prepayment of mortgage debt, before the maturity of mortgage term.
Precise Calculation - It is a very precise calculation criterion.
Calculation Method - It is usually calculated as the difference between the existing rate and the rate of the term remaining, multiplied by the outstanding principal and the balance of the term.
Mentions The Compensation Due - It usually refers to the compensation due to the lender on payout of mortgage.

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