Open and Closed Mortgages

An open mortgage can be paid off at any time without penalties. You can also make additional payments without penalties. Open Mortgage terms range from 6 months to 5 years and can have variable or fixed interest rates.

An open mortgage repayment terms are more flexible than a closed mortgage, which do not usually allow for prepayment without penalty.

closed mortgages have lower interest rates than open mortgages. You cannot pay out a closed mortgage early without a penalty, but you can still pre-pay up to 20% of your original principle balance each year with most lenders. Closed mortgage terms can range from 6 months to more than 10 years.
The prepayment penalty will apply if the borrower exceeds the allowed prepayment privileges when increasing the monthly payments, making a partial principal reduction via lump sum payment or refinancing the mortgage before the end of the term.