1. What is RBC Mortgage Penalty?

The RBC 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 end of its term.

2. How Does the Calculator Work?

The calculator uses the RBC penalty formula:

Where:

• 3 Months Interest = (Mortgage Balance × Interest Rate ÷ 12) × 3
• IRD = Mortgage Balance × (Your Rate - Current Rate) × Remaining Term

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

3. Understanding Mortgage Penalties

Details: Mortgage penalties protect lenders when borrowers break their contracts early. The penalty amount depends on your mortgage type, remaining term, and current interest rates.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Why does RBC charge mortgage penalties?
A: Penalties compensate the bank for lost interest income when you break your mortgage contract early.

Q2: Are there ways to reduce my penalty?
A: Some options include porting your mortgage, waiting until renewal, or making prepayments within allowed limits.

Q3: How accurate is this calculator?
A: This provides an estimate. Your actual penalty may include additional fees or different calculation methods.

Q4: Does the penalty change based on mortgage type?
A: Yes, fixed-rate mortgages typically use IRD while variable-rate mortgages usually charge 3 months interest.

Q5: When would IRD be higher than 3 months interest?
A: IRD is typically higher when you have a long remaining term and significant difference between your rate and current rates.