Open and Closed Mortgages 

An open mortgage is a mortgage with no rules. It permits repayment of the principal amount at any time, without penalty. Interest rates for open mortgages are generally higher than for closed mortgages because of the added pre-payment flexibility.

A closed mortgage means the borrower is agreeing to a term and offers the borrower the ability to save on interest costs. This type of mortgage cannot be repaid without prepayment penalties during its term, except as permitted in the mortgage agreement. Closed mortgages will typically provide limited prepayment privileges, but will acquire a penalty if the borrower pays any more towards the principal than the combined total of the normal monthly payment and these privileges.

Open and closed mortgages can be either fixed or variable.