An open mortgage
allows you the flexibility to pay off some or all of the mortgage at any time,
without a penalty. Interest rates are usually higher and are tied to the Bank
Prime.
Closed or Fixed
Mortgage
A closed or fixed mortgage offers you the security
of locking in your interest rate for the term of your mortgage, so you know
exactly how much principal and interest you will be paying on the mortgage
during the term. Terms range from 6 months through to 10 years.
Many
lenders will allow prepayments of up to 20% of the balance annually without a
penalty. If the mortgage is paid off in it's entirety before the end of the
term, most lenders will collect a fee of three months interest or charge the
lost interest to the end of the term.
Variable Rate
Mortgage
A variable rate
mortgage allows you to take advantage of today's low Prime Rates. The interest
rate fluctuates in relation to the 'Prime Rate'. Lenders compete by offering
various discounts below the prime rate. Payments may be fixed for up to 5 years
although the rate of interest will always fluctuate according to Bank Prime. If
the Prime rate climbs you pay more interest and if the prime rate descends you
pay off more of the principal.
