COVID-19 Update — To assist in our community’s collective effort to combat COVID-19, our physical offices are operating on a restricted basis. Although we are limiting attendance at our office by both firm members and clients, we remain otherwise fully operational and look forward to continuing to provide the highest level of legal services to our clients. Read our full response notice here.

With interest rates at historic lows, many homeowners have been thinking of refinancing their mortgages in order to take advantage of lower rates. However, if you are currently locked into a closed, fixed rate mortgage, you should be aware of a potentially large charge imposed by some lending institutions for prepaying a mortgage loan before the end of its term. This charge is often referred to as the Interest Rate Differential (“IRD”).

The IRD is calculated based on the amount of principal that you are prepaying, the remaining length of your mortgage term, and the difference between your original mortgage interest rate and the interest rate that your existing mortgage lender could charge today to borrowers. Basically, the IRD charge is an attempt to compensate your lender for the lost revenue that it would have generated had you remained with them for the balance of your mortgage term. The IRD becomes an important consideration when interest rates have decreased significantly from your original mortgage interest rate, and there is still a significant portion of your mortgage term remaining. In some cases, the IRD charge can make refinancing to capture a lower interest rate a less than profitable venture.

Contact Us

2 St Clair Ave West
Suite 1700
Toronto, ON M4V 1L5
Canada

Phone: (416) 863-0125

Fax: (416) 863-3997

Questions? Send us an email.

    Sending an e-mail to us will not make us your lawyers. You will not be considered a client of Mills & Mills LLP until we have agreed to act for you in accordance with our usual policies for accepting clients. No information we provide to you can be treated by you as legal advice, unless and until we have agreed to act for you. Confidential or time-sensitive information should not be sent through this form.