3-Year Variable Open Mortgage RatesRates Updated:
Mortgage rate The rate of interest you will pay on the outstanding balance of your mortgage. This rate can be fixed for the duration of the term or variable, fluctuating with the prime rate. Fixed rates are most popular in Canada and represent 66% of all mortgages.
Provider Mortgage providers include lenders and mortgage brokers. As the name suggests, lenders provide the funding for your mortgage. Mortgage brokers are licensed professionals with access to multiple lenders and products. According to the Canadian Mortgage and Housing Corporation, mortgage brokers accounted for 38% of mortgage originations in 2009.
Rate hold The rate hold is the time period, between 30-120 days, before your mortgage renewal date you are able to lock in the current mortgage rate. If rates go down further within this period, however, many lenders will honour the lower rate.
Prepayment Prepayment options outline the flexibility you have to increase your monthly mortgage payments or make a lump sum outlay against your mortgage as a whole. According to the Canadian Association of Accredited Mortgage Professionals (CAAMP), 28% of mortgage holders used one or both prepayment privileges in 2010.
Payment The monthly mortgage payment is calculated based on the mortgage amount, amortization period and the associated mortgage rate. A general affordability rule is that your monthly housing costs should not exceed 32% of your gross household monthly income.
Prime + 1.00
Bank of Montreal
Lump Sum: 20%
An open mortgage is one where the borrower can repay the loan, in full or in part, anytime prior to maturity without incurring penalties. This type of mortgage typically ranges from six months to one year. An open mortgage may be fixed or variable.
The flexibility to make payments on the principal at any time and at any amount is beneficial to those who are capable of making large sums of payments. It is also ideal for those who plan to sell their property in the near future.
The difference between open and closed mortgages
Closed mortgages have lower interest rates than its open counterpart. However, closed mortgages have stiff restrictions regarding how much of the mortgage you can pay off. Typical prepayment options on a closed mortgage are allowable up to 20% of the original mortgage amount, but vary from lender to lender.
Most Canadians have closed mortgages opting for the reduced flexibility at a lower rate.
Why Choose an Open Mortgage?
Home owners who are seeking to pay off their debt faster will benefit the most from an open mortgage. It also benefits investors who flip properties for profit.
However, given the significant interest premium on open mortgages, if you do not expect to move in the immediate future and your income remains relatively fixed, a closed mortgage may make more sense.