Interest Differential

Interest differential typically refers to the difference in interest rates between two financial products, loans, or currencies. In real estate, an Interest Rate Differential (IRD) is often used by lenders to calculate the penalty for breaking a fixed-rate mortgage before the end of its term. The IRD represents the difference between the original interest rate on the mortgage and the current rate that the lender could charge for a loan with a similar term. The penalty is typically based on this difference, multiplied by the remaining balance of the mortgage and the time left in the term.