Mortgages 101: Understanding the Differences Between ‘Open’ and ‘Closed’ Mortgages

Marci • July 28, 2014

If you’re planning to buy a home this year, you’re probably already investigating mortgages and the different options available to you. The reality is that for many families, home ownership is simply out of reach without taking on a mortgage. Mortgages come in a variety of forms, and it’s important to understand how they differ. ‘Open’ and ‘closed’ mortgages are two options you’ll often encounter when seeking funds to buy your home. Here’s what you need to know about these two different mortgage types, and what they mean for your financial future.

Open Versus Closed: Pay Periods and Penalties

The main difference between open and closed mortgages is that open mortgages allow early repayment, while closed mortgages do not. Every mortgage has a set repayment period that dictates what your payment schedule will be and when you will have paid your debt in full. A closed mortgage has a set repayment term, and full repayment of your mortgage prior to the end of this term will result in a penalty fee. In contrast, open mortgages offer repayment terms ranging from six months to several years, meaning you can repay your mortgage at your discretion without incurring penalties.
There is, though, one exception to the payment penalties for closed mortgages. Although you may not repay a closed mortgage in full prior to the end of the term, most of he time, you may remit up to 20 percent of the original mortgage amount per year by using a prepayment option. Talk to your mortgage advisor for a full explanation of how prepayment can expedite the mortgage repayment process.

Closed Mortgage Prepayment Penalties

If you decide to refinance or sell the property prior to the closed mortgage maturity date, you will incur a prepayment penalty equal to either three months’ interest or the Interest Rate Differential.
In the former case, three months’ interest is payable in one lump sum, while IRD applies only if current interest rates are below prevailing rates on the date of initial loan disbursement.
IRD is calculated by multiplying the difference between both percentage interest rates by outstanding balance and then by your remaining loan term. Thus, the earlier you repay the greater penalty you will incur in both the above scenarios.

That Pesky Interest: How Your Mortgage Type Changes Your Interest Rate

A typical mortgage will have an interest rate that is either fixed or variable. If your mortgage has a fixed interest rate, you pay a set percent of interest every month for the duration of your mortgage – and this amount never changes. If your mortgage has a variable interest rate, then the amount of interest you pay will fluctuate according to changes in the prime rate.
Regardless of whether your interest rate is fixed or variable, you will pay a different amount of interest for a closed mortgage than for an open mortgage. Open mortgages tend to have higher interest rates than closed mortgages, because in an open mortgage there is a lower probability that you will have the mortgage for the full term.

Open or Closed: Which is the Better Option?

Ultimately, deciding whether to opt for an open or closed mortgage will depend on your own personal needs and your plans for your financial future. If you have a limited income and require a set repayment schedule, a closed mortgage will give you the low interest rate and small monthly payment that you need. If, however, you have a higher amount of cash on hand and you expect to repay your mortgage very soon, an open mortgage will allow you to save a great deal of money in interest that you would have paid over the long term. Just be aware, however, that your interest rate may fluctuate over time – possibly making your monthly payments significantly higher than expected. The main consideration to make in deciding whether an open or closed mortgage is right for you is how long you plan to be paying off your mortgage. If you expect to pay off your mortgage extremely soon, an open mortgage is ideal. Otherwise, a closed mortgage is the safer option. Buying a home is a major purchase, and the mortgage you choose is one that will likely stay with you for most of your life. Open and closed mortgages offer vastly different terms that will appeal to different buyers, and it can be difficult to determine which option is your best bet. For more information about your mortgage options, and to discover which kind of mortgage will best meet your needs, contact our office today.

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Start Smart: Get Pre-Approved for Your Mortgage

By Marci Deane • February 25, 2026
Thinking of Buying a Home? Here’s Why Getting Pre-Approved Is Key If you’re ready to buy a home but aren’t sure where to begin, the answer is simple: start with a pre-approval. It’s one of the most important first steps in your home-buying journey—and here's why. Why a Pre-Approval is Crucial Imagine walking into a restaurant, hungry and excited to order, but unsure if your credit card will cover the bill. It’s the same situation with buying a home. You can browse listings online all day, but until you know how much you can afford, you’re just window shopping. Getting pre-approved for a mortgage is like finding out the price range you can comfortably shop within before you start looking at homes with a real estate agent. It sets you up for success and saves you from wasting time on properties that might be out of reach. What Exactly is a Pre-Approval? A pre-approval isn’t a guarantee. It’s not a promise that a lender will give you a mortgage no matter what happens with your finances. It’s more like a preview of your financial health, giving you a clear idea of how much you can borrow, based on the information you provide at the time. Think of it as a roadmap. After going through the pre-approval process, you’ll have a much clearer picture of what you can afford and what you need to do to make the final approval process smoother. What Happens During the Pre-Approval Process? When you apply for a pre-approval, lenders will look at a few key areas: Your income Your credit history Your assets and liabilities The property you’re interested in This comprehensive review will uncover any potential hurdles that could prevent you from securing financing later on. The earlier you identify these challenges, the better. Potential Issues a Pre-Approval Can Reveal Even if you feel confident that your finances are in good shape, a pre-approval might uncover issues you didn’t expect: Recent job changes or probation periods An income that’s heavily commission-based or reliant on extra shifts Errors or collections on your credit report Lack of a well-established credit history Insufficient funds saved for a down payment Existing debt reducing your qualification amount Any other financial blind spots you might not be aware of By addressing these issues early, you give yourself the best chance of securing the mortgage you need. A pre-approval makes sure there are no surprises along the way. Pre-Approval vs. Pre-Qualification: What’s the Difference? It’s important to understand that a pre-approval is more than just a quick online estimate. Unlike pre-qualification—which can sometimes be based on limited information and calculations—a pre-approval involves a thorough review of your finances. This includes looking at your credit report, providing detailed documents, and having a conversation with a mortgage professional about your options. Why Get Pre-Approved Now? The best time to secure a pre-approval is as soon as possible. The process is free and carries no risk—it just gives you a clear path forward. It’s never too early to start, and by doing so, you’ll be in a much stronger position when you're ready to make an offer on your dream home. Let’s Make Your Home Buying Journey Smooth A well-planned mortgage process can make all the difference in securing your home. If you’re ready to get pre-approved or just want to chat about your options, I’d love to help. Let’s make your home-buying experience a smooth and successful one!

Your Guide to Real Estate Investment in Canada

By Marci Deane • February 18, 2026
Your Guide to Real Estate Investment in Canada Real estate has long been one of the most popular ways Canadians build wealth. Whether you’re purchasing your first rental property or expanding an existing portfolio, understanding how real estate investment works in Canada—and how it’s financed—is key to making smart decisions. This guide walks through the fundamentals you need to know before getting started. Why Canadians Invest in Real Estate Real estate offers several potential benefits as an investment: Long-term appreciation of property value Rental income that can support cash flow Leverage , allowing you to invest using borrowed funds Tangible asset with intrinsic value Portfolio diversification beyond stocks and bonds When structured properly, real estate can support both income and long-term net worth growth. Types of Real Estate Investments Investors typically focus on one or more of the following: Long-term residential rentals Short-term or vacation rentals (subject to local regulations) Multi-unit residential properties Pre-construction or assignment purchases Value-add properties that require renovations Each type comes with different financing rules, risks, and return profiles. Down Payment Requirements for Investment Properties In Canada, investment properties generally require higher down payments than owner-occupied homes. Typical minimums include: 20% down payment for most rental properties Higher down payments may be required depending on: Number of units Property type Borrower profile Lender guidelines Down payment source, income stability, and credit history all play a role in approval. How Rental Income Is Used to Qualify Lenders don’t always count 100% of rental income. Depending on the lender and mortgage product, they may: Use a rental income offset , or Include a percentage of rental income toward qualification Understanding how income is treated can significantly impact borrowing power. Financing Options for Investors Investment financing can include: Conventional mortgages Insured or insurable options (in limited scenarios) Alternative or broker-only lenders Refinancing equity from existing properties Purchase plus improvements for value-add projects Access to multiple lenders is often crucial for investors as portfolios grow. Key Costs Investors Should Plan For Beyond the purchase price, investors should budget for: Property taxes Insurance Maintenance and repairs Vacancy periods Property management fees (if applicable) Legal and closing costs A realistic cash-flow analysis is essential before buying. Risk Considerations Like any investment, real estate carries risk. Key factors to consider include: Interest rate changes Market fluctuations Tenant turnover Regulatory changes Liquidity (real estate is not easily sold quickly) A strong financing structure can help manage many of these risks. The Role of a Mortgage Professional Investment mortgages are rarely “one-size-fits-all.” Lender policies vary widely, especially as you acquire more properties. Working with an independent mortgage professional allows you to: Compare multiple lender strategies Structure financing for long-term growth Preserve flexibility as your portfolio evolves Avoid costly mistakes early on Final Thoughts Real estate investment in Canada can be a powerful wealth-building tool when approached with a clear strategy and proper financing. Whether you’re exploring your first rental property or planning your next acquisition, understanding the numbers—and the lending landscape—matters. If you’d like to discuss investment property financing, run the numbers, or explore your options, feel free to connect. A well-planned mortgage strategy can make all the difference in long-term success.

Smart Steps to Get Your Home Market-Ready

By Marci Deane • February 11, 2026
Thinking About Selling Your Home? Start With These 3 Key Questions Selling your home is a major move—emotionally, financially, and logistically. Whether you're upsizing, downsizing, relocating, or just ready for a change, there are a few essential questions you should have answers to before you list that "For Sale" sign. 1. How Will I Get My Home Sale-Ready? Before your property hits the market, you’ll want to make sure it puts its best foot forward. That starts with understanding its current market value—and ends with a plan to maximize its appeal. A real estate professional can walk you through what similar homes in your area have sold for and help tailor a prep plan that aligns with current market conditions. Here are some things you might want to consider: Decluttering and removing personal items Minor touch-ups or repairs Fresh paint inside (and maybe outside too) Updated lighting or fixtures Professional staging Landscaping or exterior cleanup High-quality photos and possibly a virtual tour These aren’t must-dos, but smart investments here can often translate to a higher sale price and faster sale. 2. What Will It Actually Cost to Sell? It’s easy to look at the selling price and subtract your mortgage balance—but the real math is more nuanced. Here's a breakdown of the typical costs involved in selling a home: Real estate agent commissions (plus GST/HST) Legal fees Mortgage discharge fees (and possibly a penalty) Utility and property tax adjustments Moving expenses and/or storage costs That mortgage penalty can be especially tricky—it can sometimes be thousands of dollars, depending on your lender and how much time is left in your term. Not sure what it might cost you? I can help you estimate it. 3. What’s My Plan After the Sale? Knowing your next step is just as important as selling your current home. If you're buying again, don’t assume you’ll automatically qualify for a new mortgage just because you’ve had one before. Lending rules change, and so might your financial situation. Before you sell, talk to a mortgage professional to find out what you’re pre-approved for and what options are available. If you're planning to rent or relocate temporarily, think about timelines, storage, and transition costs. Clarity and preparation go a long way. The best way to reduce stress and make confident decisions is to work with professionals you trust—and ask all the questions you need. If you’re thinking about selling and want help mapping out your next steps, I’d be happy to chat anytime. Let’s make a smart plan, together.