Find the best 1-year fixed open mortgage rate

1-year mortgages are fairly common in Canada, with plenty of Canadian homeowners looking for a short mortgage term to tie them over between longer terms or to see them through the sale of a home. A 1-year fixed open mortgage offer even more flexibility, allowing you to pay off the entire mortgage at any time, with no (or minimal) prepayment penalty.

When might you consider a 1-year open mortgage?

The typical use case for a 1-year open mortgage will be when you need some short term flexibility in your mortgage and don't mind paying a higher mortgage rate in exchange for that added flexibility. A short mortgage term, like a 1-year term, only holds you to a fixed rate and set of conditions for 12 months, and an open rate lets you pay off the entire balance of your mortgage at any time.

The most obvious use case for a 1-year open mortgage term would be if you're planning on selling your home within the next year. Upon selling, an open mortgage will let you use the funds from the sale to pay off your mortgage at any time, even before your mortgage is over.

A 1-year open mortgage could also be useful if you plan to refinance in the next year but aren't ready to do so yet. Refinancing involves breaking your mortgage and starting a new one from scratch, so an open mortgage lets you do so without triggering significant prepayment penalties.

Alternatives to a 1-year open mortgage

There are a lot of mortgage products on the market, and it's very possible that there may be another option that will suit you better. Here are some of the alternatives.

An alternative term length

Open mortgages come with a variety of term lengths, and some of them may very well suit your needs better. Fixed-rate open mortgages are generally offered with 6-month or 1-year terms, but variable-rate open mortgage can come in longer term lengths like 5-years. You'll need to check with your lender to see what it offers.

Portable mortgages

If you're planning on moving home in the next year, an alternative to a 1-year open mortgage might be a portable mortgage. Many providers offer mortgages that can be moved with your home - generally only once per mortgage term. This could allow you to take out a closed mortgage with a longer term and a lower rate today, but keep that mortgage when you move to your new home.

A variable-rate mortgage

Just as open mortgages are more flexible than closed mortgages, variable rates are inherently more flexible than fixed rates. While breaking a variable-rate mortgage term still incurs prepayment penalties, the cost of them is generally much lower than for fixed-rate mortgages. If you are expecting to have to break your mortgage in a relatively short period of time, it might make more financial sense to get a closed variable-rate mortgage - which will have a lower interest rate than an open fixed-rate mortgage - and just wear the prepayment penalty when you need to. You'll need to take a close look at the numbers to see if this makes sense for you.

Each of these alternatives to a 1-year open fixed-rate mortgage will suit different situations better or worse, so it's important you speak to a financial advisor and/or mortgage broker to understand the full picture.