What is a Convertible, Open, or Closed Mortgage
March 15, 2010 - Updated: August 1, 2013
Thank you for visiting www.GreatMortgageAdvice.com By Cecilia Ramos
Choosing a closed Mortgage
This type of mortgage must usually remain unchanged for whatever term you agree to. Prepayment costs will apply if you payout, renegotiate or refinance before the end of term.
How a closed Mortgage benefits you:
Most lenders provide lower rates compared to open or convertible mortgages
The lender usually allows you to make annual prepayments of up to 20% of your original mortgage amount depending on the mortgage product you select
Choosing an open Mortgage
This type of mortgage may be repaid, in part or in full, at any time during the term without any prepayment costs.
How an open Mortgage benefits you:
An Open Mortgage provides flexibility until you are ready to lock into a closed
Allows you to pay off any or the entire mortgage without prepayment costs.
Choosing a convertible Mortgage
A convertible mortgage offers the same security as a closed mortgage, but which can be converted to a longer, closed mortgage at any time without prepayment costs. Typically associated with fixed rate mortgages.
How a convertible Mortgage benefits you:
Provides security and flexibility allowing you to convert into a longer closed term mortgage without prepayment costs, if you think rates will rise.
Most lenders Allow you to make an annual prepayment of up to 10% of your original mortgage amount.
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