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Open mortgage

Definition

A mortgage you can repay in full at any time without penalty.

Rates are materially higher than closed (often 1%+ more). Used by people planning to sell or refinance within 6-12 months.

Open mortgages trade rate for total flexibility: you can pay off any amount, any time, with no penalty. That freedom costs roughly 1%+ more than a comparable closed mortgage, so it only pays off if you'll actually use it.

It fits specific situations — selling soon, expecting a lump sum (an inheritance or property sale), or bridging while you sort out longer-term financing. For most buyers planning to stay put, a closed mortgage's lower rate wins easily.

If you want some flexibility without the open-rate premium, a closed mortgage with strong prepayment privileges is usually the better middle ground.

Sources

Choosing a mortgage that is right for you (Financial Consumer Agency of Canada)

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A lender

A bank or monoline that prices its lowest rates and tightest underwriting against borrowers who fit prime credit, income, and property criteria. The big banks (RBC, TD, Scotia, BMO, CIBC, NB) and major monolines (MCAP, First National, MERIX) are A lenders.

B lender

An alternative ("alt-A") lender that prices higher than A lenders but flexes on credit history, income documentation, property condition, or self-employed earnings. Examples include the alternative-lending programs of Equitable Bank and Home Trust.

Bridge financing

Short-term loan that lets you close on a new home before the sale of your existing one funds. Priced at prime + premium, secured against both properties, typically up to 90-120 days.

Closed mortgage

A mortgage that limits how much extra you can prepay each year and charges a penalty if you break the term early. Almost all standard Canadian mortgages are closed because the rates are materially lower than open.

Collateral charge mortgage

A mortgage registered against your property for more than the actual loan amount, letting you increase the limit later without re-registering. Common at TD and Scotia. Makes inter-lender switches harder mid-term.

Conventional mortgage

A mortgage with at least 20% down. No mortgage default insurance required. Pricing is typically higher than insured because the lender carries more of the credit risk.