Open, closed and convertible mortgages

An open mortgage lets you pay off your mortgage at any time without penalty, while a closed mortgage requires that you stick to a payment schedule. A convertible mortgage, meanwhile, falls somewhere in between.

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Who is this for?

Closed mortgage: If you’re a younger person with limited savings and no plans to pay off your mortgage in the near future, a closed mortgage may be the right choice for you. That’s because 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 – agreed upon when you acquired the mortgage in the first place – will likely require you to pay a fee.

Open mortgage: If, on the other hand, you’re confident that you can pay off your mortgage in the near term, you may want to opt for an open mortgage. That’s because an open mortgage can be repaid in part or full at any time without forcing you to pay a fee. The drawback of an open mortgage is that interest rates tend to be higher.

Convertible mortgage: If you’re not sure how long it will take for you to pay off your 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.

How will this help me?

Closed, open and convertible mortgagesOpens in a new window all have their benefits. A closed mortgageOpens in a new window may be considered the slow and steady approach to paying off a mortgage because it tends to come with lower interest rates and works for people who feel they’ll need some time to pay off their home.

Open mortgagesOpens in a new window, in contrast, are ideal for people who don’t mind higher interest rates because they want the option of paying off their home at any time. Finally, a convertible mortgage could offer a happy medium by allowing people to change to a closed mortgage at any time.*

What else do I need to know?

Terms may vary

London Life’s open mortgages are available in six-month and one-year terms. In comparison, the closed mortgage comes with terms ranging from 6 months to 10 years.

Convertible mortgage terms

A convertible mortgage lets you convert to a closed mortgage at any time without having to pay a fee. Once this conversion is complete, you must renew your mortgage for a one-year closed term or longer. To learn more about this process, speak with a London Life credit planning consultant.

* Subject to London Life lending criteria and mortgage terms.

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