Should Investors Choose An Open or Closed Mortgage?
An open mortgage is a loan secured for a property that can be paid off without penalty at any time before its date of maturity. You can make unanticipated mortgage payments of any amount at any time without having to pay any sort of compensation. These mortgages traditionally carry higher interest rates. However, the flexibility that may cause you to pay the prime rate plus premium also allows you to move into a normal fixed rate mortgage if you decide variable rates aren’t a good match. This is a great tool for real estate investors at the right time. If you get into an open mortgage too early you’ll waste money. However if you use this wisely you can save a ton of money by not paying huge penalties.
A closed mortgage is less flexible, in that you cannot pay off the loan without incurring a financial penalty. However, the interest rates are often lower as is the cost of borrowing. This is often an attractive option for those that embrace consistency. However, how comfortable are you in your current position?
Choosing between open and closed is a question of portfolio management and lucky for you, Dan Heon and The Canadian Mortgage Team have financed over 6400 real estate investment transactions in the last 20 years for investors just like you.
Thank you for reading this article “Should Investors Choose An Open or Closed Mortgage?” be sure to check out our BLOG for more interesting and helpful articles.