Find the best 5-year variable open mortgage rate in Ontario
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Best Ontario 5-year variable open mortgage rates
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Ontario 5-year variable-rate open mortgages: FAQ
Why should I compare mortgage rates?
What is the difference between a fixed vs. a variable mortgage rate?
How often are Ratehub.ca mortgage rates updated?
What is a rate hold?
WATCH: How much mortgage can you afford in 2023?
Variable open mortgage guide
Jamie David, Sr. Director of Marketing and Mortgages
What is the difference between an open and closed mortgage?
If you’re thinking of moving soon, or if you’re expecting a lump sum of money from an inheritance or bonus, you may want to consider an open mortgage. With an open mortgage, you are able to pay off the entire balance of your mortgage at any time throughout your term – without penalty. The downside is that you have to pay a premium for this option, which comes in the form of a higher interest rate.
Also read: Open vs. closed mortgage: What’s the difference?
Closed mortgages, on the other hand, are the more popular option chosen by Canadian homebuyers, because the interest rates are much lower. With a closed mortgage, the one restriction is that you’re only allowed to pay down a certain amount of your principal each year, as defined in the prepayment options of your mortgage contract. If you pay off the entire balance before your term is up, you’ll be hit with a prepayment penalty.
How much will it cost to break your mortgage?
Use our mortgage penalty calculator to find out
What is a variable open mortgage?
A variable-rate mortgage is structured as Prime +/-, meaning the borrower’s payments will fluctuate in tandem with Canada’s prime rate. This rate is used by lenders when setting the pricing of their variable products. The prime rate in turn is set based on the benchmark Overnight Lending Rate set by the Bank of Canada. This means whenever the central bank increases or decreases this rate, variable mortgage holders will see a direct impact on their payments, or the amount of their payment that goes towards their principal loan.
A variable open mortgage is one that is based on the prime rate, and also has no pre-payment restrictions.
What are the benefits of an open mortgage?
The greatest benefit offered by an open mortgage is flexibility; you are not restricted by any pre-payment limits, and will not be subjected to any penalty fees, if you choose to pay off part, or all, of your mortgage early. This makes open mortgages a great option for borrowers who know they’ll need to sell the property promptly after taking the mortgage out, or anticipate having the means to pay off their mortgage. This can be a more financially feasible option than breaking your mortgage, for example.
Also read: Can you pay off your mortgage upon renewal? Should you?
Why are open mortgage rates higher than closed ones?
This flexibility comes at a cost; because an open mortgage will be paid off sooner, they are generally less profitable for lenders, compared to a closed mortgage, where interest payments are made over an amortized schedule of either 25 or 30 years. To compensate for this, open mortgage rates tend to be priced considerably higher than closed ones.
References and Notes
All data percentages were taken from the CMHC Fall 2023 Residential Mortgage Industry Report
Jamie David, Director of Marketing and Head of Mortgages
Jamie has 15+ years of business and marketing experience. She contributes her mortgage expertise to The Globe and Mail and authors Ratehub’s mortgage and homebuying guides. read full bio