What is the difference between open vs closed mortgages?

An open mortgage gives homeowners the flexibility to pay off their mortgage at any time. A closed mortgage is more strict – homeowners have to pay a penalty if they choose to pay off their mortgage before the term ends.

Open mortgage: Allows you to pay back the borrowed funds any time during the term, without having to pay a prepayment charge.

• Maybe a good choice if: There’s a chance you’ll want to pay out your mortgage during your term.
• Benefits: With an open mortgage, you can prepay or even pay out the entire balance of your mortgage at any time during the term without having to pay a
• prepayment charge.
• Drawbacks: Open mortgages typically have higher rates than closed mortgages.

Closed mortgage: Cannot be prepaid, renegotiated or refinanced before maturity, dependent on its terms.

• Maybe a good choice if: You’re comfortable staying with your mortgage for the full term. You don’t expect to pay it out before the term ends.
• Benefits: Closed mortgages typically have lower rates than open mortgages.
• Drawbacks: If you want to pay out your mortgage before the term is done or make a large prepayment, you may be have to pay a prepayment charge.