Closed vs Open Variable Rate Mortgage
With interest rates trending low, Variable Rate Mortgages (VRMs) have shown to be a tremendous money-saving option. And like Fixed Rate Mortgages, VRMs come with open and closed terms.
An open VRM allows the borrower to pay off the mortgage at any time, without penalty, while a closed VRM locks the borrower in for a specific length of time.
An open VRM is normally offered at a higher interest rate than a closed VRM for the same length of term . Many financial insitutions allow borrowers with closed VRMs to lock-in to a fixed rate mortgage - as long as they choose a term longer than 3 years.
Even though the Bank of Canada is keeping rates low into the first half of the year, Central Banks around the world will inevitably raise rates if the economy shows signs of stability. If you're choosing a Variable Rate Mortgage, be sure you have the ability to lock-in the interest rate on a moment's notice.
When you have mortgage financing questions, look to us to point you in the right direction. Get to know all the financing options. Decisions now can save, or cost you, thousands down the road.