Mortgage Penalty Calculator BMO

BMO Mortgage Penalty Calculation:

\[ Penalty = \max(IRD, 3\ Months\ Interest) \]

Mortgage Principal:

Current Interest Rate:

Remaining Term:

years

Current IRD Rate:

Estimated Penalty:

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1. What is BMO Mortgage Penalty?

The BMO mortgage penalty is the greater of either the Interest Rate Differential (IRD) or three months' interest when breaking a fixed-rate mortgage before maturity. This calculator helps estimate potential penalties.

2. How Does the Calculator Work?

The calculator uses the BMO penalty formula:

\[ Penalty = \max(IRD, 3\ Months\ Interest) \]

Where:

\( IRD \) — Interest Rate Differential (Current IRD Rate - Your Rate) × Principal × Remaining Term
\( 3\ Months\ Interest \) — (Principal × Current Rate) ÷ 4
\( Principal \) — Remaining mortgage balance
\( Current\ Rate \) — Your mortgage interest rate
\( Current\ IRD\ Rate \) — Bank's current rate for similar term
\( Remaining\ Term \) — Years left in your mortgage term

Explanation: BMO uses whichever calculation results in the higher penalty amount when you break your mortgage.

3. Importance of Penalty Calculation

Details: Understanding potential penalties helps when considering refinancing, selling, or switching mortgages. Penalties can be substantial, especially with large mortgages or significant rate differences.

4. Using the Calculator

Tips: Enter your remaining mortgage balance, current interest rate, remaining term in years, and the bank's current rate for a similar term. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why does BMO use the greater of IRD or 3 months interest?
A: This ensures the bank is compensated for their loss when you break the mortgage contract early.

Q2: How is the IRD rate determined?
A: The IRD rate is typically the bank's current posted rate for a term similar to your remaining term.

Q3: Are penalties different for variable rate mortgages?
A: Yes, variable rate mortgages typically charge only three months' interest as the penalty.

Q4: Can penalties be negotiated?
A: Generally no, but exceptions may exist in special circumstances or as part of new mortgage offers.

Q5: Are there other fees when breaking a mortgage?
A: Yes, there may be administrative fees or discharge fees in addition to the penalty.