Open Mortgage vs. Closed Mortgage
Open Mortgage allows the borrower to pay down their mortgage faster without facing any penalties. If you choose to go with this product you are able to pay down any amount at any time on your principal amount without having to pay extra charges.
Typically the clients who best fit an open mortgage option are those who are self-employed and their income varies. That way when they earn extra money they are able to put it towards their mortgage. Also those who expect an increase on their income in the future may choose this option if they wish to pay down their mortgage faster in a shorter time period.
Closed Mortgage does not allow the borrower to pay down their mortgage before the end of the term. However it will typically provide limited penalty free lump-sum payments that the borrower is able to make on the principal amount. Nevertheless if you choose to pay down more money you will incur penalty charges.
Closed mortgage is beneficial to those who do not wish to sell their property or refinance their home in the foreseeable future. Closed mortgages usually come with a lower initial mortgage rate than fully open mortgages. If the borrower does not intend any type of prepayment for a number of years, it may be best option not to pay the higher interest of an open mortgage.
For more information on these products please contact Robert Clancy:
Robert Clancy, AMP,
VERICO Safebridge Mortgage Solutions
SAFEBRIDGE Financial Group
Tel: 416 899-1467
Fax: 1866 385-4049