Closed vs Open

A variable rate mortgage (VRM), sometimes called a floating rate mortgage, is a mortgage where the interest rate fluctuates during your term.  The variable rate is related to the Bank of Canada prime interest rate. That means, that if the Bank of Canada increases the Prime Interest rate, then your interest rate on your mortgage will go up too.

When you choose to get a Variable Closed , or generally speaking a “closed” mortgage, means that you are agreeing to a term. Usually Terms for a variable closed mortgage can range from 1 year to 5 years. If you back out of the mortgage before the term is up, you will have to pay a penalty.  For a variable closed mortgage this amount is usually 3 months interest of the remainder of principal of your mortgage.

What are Open Mortgages?

An open mortgage, as mentioned above, is a mortgage with no penalty  which can be prepaid at any time, without requiring the payment of additional fees or penalties.  You can pay back the money you borrowed any time.