Open sounds better than closed, but which one is right for me?
What is an open mortgage?
Open mortgages, as opposed to closed mortgages, have completely flexible options to increase your monthly payments by any amount, or you can pay off the entire mortgage at any time you choose, without incurring any penalty from your lender.
Why doesn’t everyone choose an open mortgage?
- Open mortgage usually come with much higher interest rates
- Closed mortgages do not offer the ability to pay down 100% of your mortgage, however, they still can provide prepayment privilidges, such as the ability to pay down 20% of principal yearly.
- The cost to break the mortgage may not always be more costly than the higher interest rate that comes with an open mortgage (especially if you choose a variable rate mortgage where penalties to break are less than a fixed rate mortgage).
Who would get an open mortgage?
You are close to paying off your entire mortgage (near the end of your amortization)
You are flipping the house you purchased
You are only going to live in the home for a short period of time
What is the bottom line here?
The best thing you can do for yourself is to work with us to find the perfect mortgage that will suit your needs. We will look at the whole picture and evaluate your situation so that not only are you placed in the best mortgage, but just as importantly, you understand why exactly we recommend the mortgage we do. At Homewise, we are as equally focused on suitability and cost savings as we are on education so that you feel completely comfortable at the end of the day.