What is the difference between an open and closed mortgage?

An open mortgage gives you more flexibility, allowing you to pay off your mortgage or make changes without prepayment charges. A closed mortgage typically offers a lower interest rate but has restrictions on paying off or changing your mortgage before the end of your term.

Is an open or closed mortgage better?

The right choice depends on your plans and financial goals. An open mortgage may be a good fit if you value flexibility or expect changes, such as selling your home, receiving a large lump sum or paying off your mortgage sooner. A closed mortgage may be better if you want a more predictable mortgage and don't expect to make major changes during your term.

What happens if I break a closed mortgage?

If you pay off or make changes to a closed mortgage before your term ends, you may have to pay a prepayment penalty. The amount depends on your mortgage agreement and financial institution.

Why do open mortgages usually have higher interest rates?

Open mortgages generally have higher interest rates because they provide more flexibility. The higher rate reflects the added ability to make changes or pay off your mortgage without paying prepayment charges.

Open or closed mortgage

Open mortgage

Pay anytime, penalty-free

Pay down or pay off your mortgage whenever you’re ready — with no extra charges.

Convert on your schedule

Switch to any other term at any time without facing prepayment charges.

Refinance for less

Refinancing costs less because there are no prepayment fees to worry about.

An open mortgage offers you a bit more flexibility. It allows you to pay off your mortgage balance at any time without incurring prepayment charges, giving you the freedom to make changes to your mortgage terms, or even refinance without penalties. With terms typically ranging from six months to five years, open mortgages offer a short and flexible repayment schedule, catering to those who value adaptability in their financial plans. Generally, open mortgages come with higher interest rates than closed mortgages because you’re paying for the added flexibility they provide.

Closed mortgage

Lower interest rates

Closed mortgages typically offer lower rates than their open counterparts.

Rate protection

When rates rise, yours won’t — your interest rate is locked in for the full term.

Prepayment options

Some lenders offer yearly prepayment and lump-sum payment options within limits.

A closed mortgage is like having a reliable map for your mortgage journey. Your interest rate and terms are set from the start and remain unchanged until the end of your agreed-upon period, giving you predictable payments and stability. If you decide to change or break your mortgage before the end of your term, you’ll most likely have to pay a prepayment penalty. This fee varies by financial institution and depends on your mortgage details. At Conexus, closed mortgage terms can range from six months to five years.

Which one is right for you?

Before you decide, ask yourself three questions:

Are you expecting a large amount of money — like an inheritance or a bonus from work — that you might want to use to pay down your mortgage faster?
Do you plan on moving or selling your home before your mortgage term ends?
Are you comfortable having a higher interest rate in exchange for added flexibility?

If you found yourself answering yes to any of these, an open mortgage may be the right choice — it gives you the adaptability you need without the worry of penalty fees. Answered no across the board? A closed mortgage’s lower rate and stability may serve you better. However, for personalized guidance tailored to your unique mortgage needs, it’s always recommended to consult with one of our Mobile Mortgage Specialists or Financial Advisors.

FAQs

Common questions.

Here’s what people ask us the most.

: An open mortgage gives you more flexibility, allowing you to pay off your mortgage or make changes without prepayment charges. A closed mortgage typically offers a lower interest rate but has restrictions on paying off or changing your mortgage before the end of your term.
: The right choice depends on your plans and financial goals. An open mortgage may be a good fit if you value flexibility or expect changes, such as selling your home, receiving a large lump sum or paying off your mortgage sooner. A closed mortgage may be better if you want a more predictable mortgage and don't expect to make major changes during your term.
: If you pay off or make changes to a closed mortgage before your term ends, you may have to pay a prepayment penalty. The amount depends on your mortgage agreement and financial institution.
: Open mortgages generally have higher interest rates because they provide more flexibility. The higher rate reflects the added ability to make changes or pay off your mortgage without paying prepayment charges.

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Still unsure which option to choose?

Open or closed, the right choice comes down to your plans, your timeline, and your comfort with flexibility versus savings. Our Mobile Mortgage Specialists and Financial Advisors will walk you through both, run the numbers, and help you land on the mortgage that plays your tune.

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