Open vs. Closed Mortgages: The Flexibility Trade-off

An open mortgage can be paid off in full, at any time, with no prepayment penalty — but that flexibility comes at a cost: open mortgage rates are typically noticeably higher than closed ones.

A closed mortgage restricts how much extra you can pay down before triggering a penalty (governed by your prepayment privileges), but offers a meaningfully lower rate in exchange — the vast majority of Canadian mortgages are closed for exactly this reason.

Open mortgages make sense in fairly specific situations: you're expecting a large lump sum (an inheritance, a business sale, a home sale) and know you'll pay off the mortgage soon, or you're in a short-term bridge situation. For most buyers on a standard multi-year timeline, a closed mortgage's lower rate outweighs flexibility they're unlikely to use.