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Convertible, Closed & Open Mortgages; What Are They And Why Are They Good & Bad?
The mortgage acquisition process for a new home is far from easy; even from the very first step. Many homebuyers simply don’t know what’s best for them, and whether they’ll even make it through the first phase, nevermind receive the loan.
More often than not, mortgage brokers like us are there to help, but we understand how overwhelming an experience it can be for you. This week, we want to reduce the stress by explaining a few options you have!
The closed mortgage: usually applies to a younger person with limited savings and no plans to pay off your mortgage in the near future. Why? Interest rates for closed term mortgages tend to be lower than they are for open term mortgages. However, it’s important to keep in mind that renegotiating your interest rate that you agreed upon when you acquired the mortgage in the first place will likely require you to pay a fee. There’s always an extra expense somewhere!
Th open mortgage: this can apply to a younger person if they’re sure they can pay off the loan in the short term. Why? That’s because an open mortgage can be repaid in part or full at any time without forcing you to pay a fee. But there’s a catch! The drawback of an open mortgage is that interest rates tend to be higher.
The convertible mortgage: this can apply to someone who’s not sure how long it will take for them to pay off their mortgage, you may want to consider a convertible mortgage, which allows you to convert to a longer, closed-term mortgage at any time without incurring penalties.
It’s always useful to talk to a broker to get some honest feedback before making a decision, but these brief descriptions here are clear and already give you an idea of what you’re looking for and help you take the next step quickly!
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