Closed Mortgage

Overachiever looking to pay off your mortgage early? Then, a closed mortgage might not be right for you. The interest rate for a closed mortgage is generally lower than the interest rate for a comparable open mortgage. However, this type of loan restricts the Borrower’s ability to pay off their mortgage early by imposing penalties. Most contain some form of prepayment privilege but they are limited. For a variable-rate closed mortgage (or ARM) the penalty is typically equal to 3 months of interest.  For a fixed-rate closed mortgage the penalty is typically the greater of 3 months interest or the Interest Rate Differential.