Open vs. Closed Mortgages: What to Know

Open Mortgage:

• Flexibility: Pay off, refinance, or make lump-sum payments anytime without penalties.

• Interest Rates: Higher due to flexibility.

• Term Length: Shorter terms, usually 6 months to 1 year (fixed) or up to 5 years (variable).

• Best For: Those expecting a financial windfall, selling soon, or anticipating higher income.

Closed Mortgage:

• Restrictions: Limited prepayment options; penalties for early payoff or exceeding limits.

• Interest Rates: Lower, making them more popular.

• Prepayment Options: Some allow small prepayments, like increasing monthly payments or making lump sums.

• Best For: Homeowners planning to stay for the term without major financial changes.

Decision Point: Choose an open mortgage for flexibility if your financial situation might change, or a closed mortgage for stability and lower interest costs.