There are a lot of options and different mortgages in the market place today. Here is an explanation of the benefits of 3 terms that get thrown around in conversations when discussing mortgage financing.
Mortgage Terms are the life of an interest rate you have in place for your mortgage. They can range from 6 months to 10 years and depending on your goals you would pick, not only, the length of the term but the kind of term. They are:
Closed term mortgage
Convertible term mortgage
Open term mortgage
A closed term mortgage may be ideal 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 pay off your mortgage faster. You will pay a prepayment charge if you wish to renegotiate your interest rate or pay off your mortgage balance prior to the end of its term.
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.
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 pre-payment flexibility
Tony Marchigiano | Mortgage Specialist - Mortgage Sales BC Region, RBC Royal Bank | Royal Bank of Canada | T. 604-505-7109 | F. 778-737-0054