Open vs Closed Mortgages: Which One is Best For You?

Different mortgages are available depending on your situation. It’s important that both current and prospective homeowners realize the advantages and disadvantages of each type of loan. Today, we’ve outlined some of the major differences between two loans, open and closed.

Open Mortgage

This type of mortgage allows you to pay off the principal amount on your own schedule without facing any penalties.

For those who are self employed, own a business, or get paid at irregular intervals, this type of mortgage is the more appealing option. If you had a profitable year, you can choose to put that extra money towards the mortgage; it also allows you to use any funds you earn from your liquid assets (investments such as stocks and bonds) or non liquid assets (land, another home) or other windfalls (any money earned from insurance claims, inheritances, and/or winning the lottery) in paying the loan off. The ability to pay off the mortgage in large amounts make this method more attractive than closed mortgages.

More often than not, open mortgages tend to come with a higher level of interest than closed because there isn’t a fixed schedule set up for payments. If you prefer paying it off on a recurring basis, you might find the the next option might to be more suitable.

Closed Mortgage

Closed mortgages are fantastic for people who earn steady, dependable pay. If you’re looking to settle down and aren’t expecting any drastic changes with your life or career, this style of loan is probably more appropriate for your situation. Because a repeated payment cycle is set up, closed mortgages have lower interest rates than the open variety.  

Depending on the negotiation between you and your mortgage broker and how long you’ve been paying off the mortgage, it’s possible to increase the month-to-month payments or pay a percentage of the principal amount as a lump sum (this is also known as pre-payment privilege). Although there is some flexibility, there is one stipulation with closed mortgages: if you attempt to pay more than the agreed amount, you will face a penalty. Also, if you need to break your mortgage for any reason, you’ll be required to pay additional fees.

As always, if you need help in figuring out which mortgage is most appropriate for you, give us a call at 780-438-2500 or email me at for any additional questions.


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