Posted on: 16th Nov, 2011 09:44 pm
I am going through the loan process and I’m hearing terms like closed, convertible and open mortgage terms. I am so confused… no one can properly explain these terms to me!! Can anyone please explain the difference between closed, convertible and open mortgage terms?
A closed term mortgage is a type of loan which you can take in case you're not planning to pay off your mortgage in the short term. The interest rates for such loans are comparatively lower. If you pay off the loan before the loan term, then you will have to pay a pre-payment penalty charge. A convertible mortgage, on the other hand, gives you the same benefits as a closed mortgage, but can be converted to a closed term at any time without prepayment charges. Open term mortgages can be a good option if youre planning to pay off your mortgage in the near future. They can be repaid before the loan term without prepayment charges. Interest rates of such mortgages are higher.
Hello Autumn,
A restrictive type of mortgage that cannot be prepaid, renegotiated or refinanced without paying breakage costs to the lender. This type of mortgage makes sense for homebuyers who are not planning to move anytime soon and will accept a longer term commitment in exchange for a lower interest rate. Closed-end mortgages also prohibit pledging collateral that has already been pledged to another party.
:idea:
A restrictive type of mortgage that cannot be prepaid, renegotiated or refinanced without paying breakage costs to the lender. This type of mortgage makes sense for homebuyers who are not planning to move anytime soon and will accept a longer term commitment in exchange for a lower interest rate. Closed-end mortgages also prohibit pledging collateral that has already been pledged to another party.
:idea:
