When you are shopping for a mortgage, you may hear the terms, CLOSED or OPEN mortgage. Let me explain the difference between these two options so you can determine which one is better for you.
OPEN MORTGAGE An “open” mortgage means that the mortgagor (the borrower) can pay the mortgage off, fully, at any time, without a mortgage penalty. A fully open mortgage is suitable for the following types of borrowers:
a) a property investor buys a property and has intention of selling it in a very short timeframe;
b) a borrower sets up this mortgage because they are expecting a large sum of money (for example, an inheritance or a work bonus) and will use that money to pay off the full mortgage loan amount;
c) a borrower who might be required to move on notice (perhaps due to a work relocation requirement) and would need to pay the mortgage off in full when the house sells.
d) you receive regular large bonus amounts, as an employee of your company, and you wish to apply these amounts to your mortgage anytime without the restrictions that might come on a lender's regular pre-payment terms.
e) or perhaps you just do not want to be locked into any term, for your mortgage loan.
Note that, the mortgage rates, for fully OPEN mortgages are higher than those given for “closed” mortgages. For example, effective today November 24, 2009, a fully open variable mortgage rate, is available at Prime Rate Plus 0.80% = 3.05%
CLOSED MORTGAGE A closed mortgage means that the mortgagor (the borrower) is given a contract “term”. If the borrower breaks the mortgage, before that contract term is up (known as the renewal date), the borrower must pay the mortgagee (lender) a full three months of interest penalty to get out of the contract (or IRD penalty).
Variable mortgage contract terms are available for 3 year terms and 5 year terms, right now. A closed variable, 5 year term, mortgage rate is priced right now at between Prime Rate Minus 0.10% = 2.15% up to Prime Rate Plus 0.10% = 2.25%. A closed variable, 3 year term, mortgage rate is priced at Prime Rate Minus 0.25% = 2.00%.
So you can see that there are specific reasons why a borrower would choose a closed mortgage over an open mortgage.
This post was written by Elizabeth Blair on November 24, 2009, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario. Elizabeth services mortgage clients all over the Greater Toronto Area.
You can contact Elizabeth by phone: (905) 510-5785 Or email: eblair@mortgageedge.ca
Visit her website at: www.missmortgage.ca
Elizabeth Blair is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) www.imba.ca Lic # M08005880 / Brokerage Lic # 10680
Head office is located at: 15 Wertheim Court, Suite 210, Richmond Hill, Ontario, L4B 3H7, Canada
The bond is up by more than 22 points in the last few days. We have already seen some movement at the bank level, and expect to see movement early next week if the bond stays where it is at – see links below.
Are you pressed for time? With fixed rates rising, you may be wondering how to jump on a rate hold fast.
Please call me today to find out about locking in a rate for 120 days. It only takes 2 minutes (time is guaranteed) to request a Rate Hold*.
See link: Announcement by a major bank
See link: Bonds
Here's a good article on the great interest rate debate. The Fed in the US, will fire the first shot. Even though Australia raised rates last week, most bankers will follow the Fed. To ignore the Fed would mean fluctuations in currency values that would hurt one's economy. See following link in the New York Times. New York Times
* ”Rate Hold”: a rate hold is not the same as a mortgage pre-approval application. If you apply for a rate hold, you are still required to undergo a regular mortgage application process. The lender reserves the right to either accept or decline, any applicant, based on their review of the mortgage applicant(s) submitted application(s). This review involves the verification of personal credit report history and verification of income.
This blog post was written by Elizabeth Blair on October 12, 2009. Elizabeth Blair is a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario. Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.
You can contact Elizabeth directly by phone at (905) 510-5785 by email at eblair@mortgageedge.ca or you visit her website at: www.missmortgage.ca
Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) www.imba.ca Lic # M08005880 / Brokerage Lic # 10680
Head office is located at: 15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.
I have always been curious to know the top and most important things, that a Realtor wants, from their mortgage financing contact?
Can you take a second and send me a response and list your top 3 or 5 things please?
Email: eblair@mortgageedge.ca
I have not been able to check email, or access my website for TWO DAYS.
Does anyone use this web hosting service: www.netfirms.ca
What's wrong with their service, anyone know why they are down and have not posted any official update to their customers ?
Please email me at: eblair029@yahoo.com
A realtor I work with, recently told me that they MUST send the names of three people, to their clients, if they are looking for financing.
I researched this with RECO and they advised that there is no such rule or requirement set by RECO who governs the real estate industry.
Would anyone tell me please where this might have come from?
Emails only please to: eblair@mortgageedge.ca
ActiveRain Corp. is not responsible for the accuracy of the site's content (which is written by members of the ActiveRain Real Estate Network) and does not endorse the views of the real estate agents, mortgage brokers, and others listed here.
Powered by the ActiveRain Real Estate Network
© 2009 ActiveRain Corp. All Rights Reserved