# How To Calculate Prepayment Charges

## How To Estimate Three Months’ Interest (90 days)

**Step 1**

A) Calculate the remaining balance of the mortgage

**Step 2**

B) Your current annual interest rate expressed as a decimal

(for example, 6.75% = .0675)

**Step 3**

C) A x B = C

**Step 4**

D) C ÷ 4 = D

D = Your estimated three months’ interest amount

#### Three Months’ Interest Example:

1. | $359,000 | A) | Remaining balance of the mortgage |

2. | .0525 | B) | 5.25% interest rate on mortgage |

3. | $18,847.50 | C) | Annual interest on balance at current rate A x B = C |

4. | $4,711.87 | D) | D = Your estimated three months’ interest amount C ÷ 4 = D |

## How To Estimate Interest Rate Differential (IRD)

Follow these steps to estimate the interest rate differential amount:

Step 1

____________ | A) | The present annual interest rate on your existing mortgage. |

____________ | B) | The current annual interest rate for a new mortgage with a term that is the next closest to the remaining term of your existing mortgage. |

____________ | C) | A – B, which is the difference between your existing interest rate and the current rate. Express C as a decimal; for example, 6% = 0.06 (if C is negative IRD does not apply). |

____________ | D) | The remaining balance of the mortgage. |

Step 2

____________ | E) | The number of months left until the mortgage maturity date (rounded down). |

____________ | F) | (C x D x E) ÷ 12 (estimated interest rate differential amount). |

The larger amount from method 1 or method 2 is the approximate cost of prepaying your mortgage in full today.

#### Interest Rate Differential Example:

Follow these steps to estimate the interest rate differential amount:

9% = 0.09 | A) | The annual interest rate on the mortgage. |

6% = 0.06 | B) | The current annual interest rate for a new mortgage with a term that is closest to the remaining term in the existing mortgage. |

3% = 0.03 | C) | Equals A – B, which is the difference between the existing interest rate and the current interest rate. Use the decimal form for calculation; thus, 3% = 0.03. |

$100,000 | D) | The amount to be paid off. |

36 months | E) | The number of months left until the mortgage maturity date. |

$9,000 | F) | Equals (C x D x E) ÷ 12 [(0.03 x 100,000 x 36) ÷ 12] = 9,000 (estimated interest rate differential amount) |

In this example, the estimated cost to pay off the mortgage before the maturity date is $9,000 because this amount is higher than the three months interest costs. Please call us at 1-855-767-3031 for the exact cost of paying off a mortgage before the maturity date. In this example, the exact interest differential amount would be lower than the amount estimated above.