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Open Term Mortgages

Even if we receive a steady paycheque every two weeks, we cannot always predict those little extras such as bonuses, inheritance, and gifts. When you take out a mortgage you will have many options at your disposal, such as fixed or variable rate, open or closed, and five or 10-year. Many Canadians would prefer to put any extra money they receive directly onto their mortgage without consequences in order to pay it down quickly. For those borrowers there is the open term mortgage.

What Is An Open Term Mortgage?

When you take out an open term mortgage you have the ability to repay the principal amount at any given time without facing penalties. The principal is the total amount owing on your loan. With an open term mortgage, you have the option to convert it to another term whenever you wish without being charged pre-payment. Open mortgages normally have higher interest rates than for their closed counterparts due to the flexibility you have when it comes to prepayments. However, many people find the idea of prepayments without penalty to be very enticing. Plus, by being able to make extra payments towards your principal you could offset the higher interest rate that comes with this type of mortgage.

How Do Self-Employed Individuals Benefit From An Open Term Mortgage?

If you are self-employed, your income may vary. One month you may pull in $1,200 while the next month it could triple. With an open term mortgage you can use your extra money to pay off your loan. Furthermore, if you aren’t self-employed but work somewhere that offers commission, you can use that money to prepay your mortgage. Additionally, if you are expecting an increase in income through a pay raise, having an open mortgage will give you the opportunity to make extra payments. In reality, open term mortgages benefit everyone because you will have prepayment privileges that are not available with all loans.

Should I Meet With A Broker To Inquire About An Open Term Mortgage?

The answer is a resounding yes. When working with a mortgage broker, you will be given unlimited mortgage options because brokers have relationships with a variety of lenders. They will match you with a lender that is offering the best open term mortgage to suit your financial situation. Another bonus of using the services of a mortgage broker is that they do not charge for their help.


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Your home is your most valuable asset. It is probably the single largest investment you will make in your lifetime. Your home is more than a place to rest your head and raise a family. Your home contains equity. It is a treasured resource and in some cases, can even be used as an ATM (aka cash back mortgages and HELOCs – don’t worry we’ll get there).

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