Can't decide between a closed or open mortgage? There are many factors to consider such as your financial goals and how soon you want to pay off your mortgage.
Closed Mortgage
Closed term mortgages are usually the better choice if you're not planning to pay off your mortgage in the short term. Interest rates for closed term mortgages are generally lower than for open term mortgages. Closed term mortgages offer you the ability to save on interest costs and payoff your mortgage faster. However, you will pay a penalty charge if you wish to renegotiate your interest rate, prepay more than your mortgage allows or pay off your mortgage balance prior to the end of its term.
Open Mortgage
Open term mortgages may be appealing if you are planning to pay off your mortgage in the near future. They can be repaid either in part or in full at any time without penalty charges. Open mortgages can be converted to any other term, at any time, without a penalty charge. Interest rates for open mortgages are generally higher than for closed mortgages because of the added pre-payment flexibility.
Open vs. Closed: Which is Better For You?
Closed Mortgages are usually a more popular product because of lower interest rates. Open Mortgages give you freedom to make extra payments at any time or pay off the mortgage in its entirety without penalty charges. Whether open or closed, what is best for you is dependent on your actual needs. If you plan on moving or selling the home within the next year, then an open term may best suit your needs. If you will not be relocated by work and intend on staying in your home for at least five years, then a closed mortgage may better suit your needs.
If you are unsure which mortgage is best for you, give me a call at 705-743-3522. I will gladly help you make an educated and informed decision today!
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