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Can't decide between a closed, open or convertible mortgage? There are many factors to consider such as your financial goals and how soon you want to pay off your mortgage.
Open Mortgage
Open term mortgages may be appealing if you are planning to pay off your mortgage in the near future. They can be repaid either in part or in full at any time without prepayment charges. Open mortgages can be converted to any other term, at any time, without a prepayment charge. Interest rates for open mortgages are generally higher than for closed mortgages because of the added prepayment flexibility.
Closed Mortgage
Closed term mortgages are usually the better choice if you're not planning to pay off your mortgage in the short term. Interest rates for closed term mortgages are generally lower than for open term mortgages. Closed term mortgages offer you the ability to save on interest costs and payoff your mortgage faster. You will pay a prepayment charge if you wish to renegotiate your interest rate, prepay more than your mortgage allows or pay off your mortgage balance prior to the end of its term.
Convertible Closed Mortgage
A convertible mortgage gives you the same benefits as a closed mortgage, but can be converted to a longer, closed term at any time without prepayment charges.
Frequently Asked Questions
What are the most common mortgage types in Canada?
There are two main types of mortgages in Canada: fixed rate and variable rate.
A fixed rate mortgage offers stability and predictable payments, since the interest rate stays the same for the length of the term.
A variable rate mortgage fluctuates with the lender's prime rate, which gives homeowners the opportunity to take advantage of falling interest rates. If interest rates rise, more your regular mortgage payment will go towards interest costs. A variable rate mortgage can typically be converted to a fixed rate mortgage.
In terms of popularity, 3-year and 5-year rate terms are common options chosen in Canada. However, a wide range of other rate terms are also available to choose from.
What is the longest mortgage amortization in Canada?
For most Canadians, the typical amortization period is 25 to 30 years.
As of December 15, 2024, 30-year amortizations are available for all first-time home buyers, whether their mortgage is insured or uninsured.
In some cases, certain lenders may offer longer amortization periods - such as up to 35 years for uninsured mortgages - depending on the lender and the specific mortgage product.
Personal lending products and residential mortgages are offered by Royal Bank of Canada and are subject to its standard lending criteria. Some conditions apply.