1. What is First National Mortgage Penalty?

The First National mortgage penalty is calculated as the greater of either three months' interest or the interest rate differential (IRD). This penalty applies when you break your mortgage contract before the maturity date.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• \( 3\ Months\ Interest = \frac{Mortgage\ Balance \times Interest\ Rate}{12} \times 3 \)
• \( IRD = Mortgage\ Balance \times (Current\ Rate - IRD\ Rate) \times \frac{Remaining\ Term}{12} \)

Explanation: The calculator compares both penalty calculation methods and selects the higher amount as your estimated penalty.

3. Understanding Mortgage Penalties

Details: Mortgage penalties protect lenders when borrowers break their mortgage contracts early. The penalty compensates the lender for lost interest income.

4. Using the Calculator

Tips: Enter your current mortgage balance, interest rate, remaining term in months, and the current IRD rate. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: When would I pay a mortgage penalty?
A: You would pay a penalty when breaking your mortgage contract before maturity, such as when refinancing, selling your home, or switching lenders.

Q2: How is the IRD rate determined?
A: The IRD rate is typically based on current rates for a term similar to your remaining term, minus any discount you received.

Q3: Can I avoid mortgage penalties?
A: Some lenders offer portability options or allow penalty-free prepayments up to certain limits. Check your mortgage contract for details.

Q4: Are there other fees besides the penalty?
A: Yes, there may be administrative fees, discharge fees, or legal fees in addition to the prepayment penalty.

Q5: Is this calculator accurate for all situations?
A: This provides an estimate. Your actual penalty may vary based on specific terms of your mortgage contract.