There are significant differences between open and closed mortgages. Our mortgage brokers can provide information that can help you make the right choice for you mortgage. If you have questions regarding an open vs closed mortgage please email or call us.
Closed mortgages are usually the mortgage interest rates advertised by the banks. The closed mortgage rate is usually the lowest interest rate available. People that can meet all the terms and conditions of the mortgage can get a very good deal. If you feel that you can not meet all the terms of the mortgage, please consult with a mortgage broker before signing the document. Mortgages always come with a “catch”, the lowest rate usually has a number of conditions. The problem is that many people do not fulfil the terms of their mortgage. There can be a high cost if you do not meet the requirements of a mortgage. A closed mortgage is usually best for a person that has no intention of moving or selling their home for the period of the mortgage.
Open mortgages usually have a slightly higher interest rate and much more flexible mortgage terms. There may be a minimum cost or a fee to apply for an open mortgage. The advantage of an open mortgage is that you can cancel it whenever you want. In most cases there is a three month penalty for early payment of the entire mortgage. An open mortgage is a good option for people that may sell the house within a short time frame. With a closed mortgage you pay the entire interest for the term of the mortgage. The amount of interest to pay off the mortgage could be tens of thousands of dollars. An open mortgage requires only the three month penalty which is much cheaper.
Our mortgage brokers can provide a free consultation and outline your options. Call us before you sign your next mortgage.
Follow this link for the Bank of Canada.