An open mortgage is a type of mortgage loan that allows borrowers the flexibility to repay the principal amount, in part or in full, at any time before the loan’s maturity date without incurring penalties or fees. Open mortgages generally come with higher interest rates compared to closed mortgages, as they provide borrowers with the option to make additional payments or refinance the loan to take advantage of lower interest rates. These mortgages are particularly beneficial for borrowers who anticipate a significant increase in income or expect to sell the property before the mortgage term expires.
Related real estate terminology:
Closed mortgage
Mortgage loan
Prepayment penalty
Refinance
Adjustable-rate mortgage (ARM)
Fixed-rate mortgage
Mortgage term
Amortization schedule
Loan-to-value ratio (LTV)
Mortgage principal
References:
Investopedia: Open Mortgage – Definition and Explanation
The Balance: Understanding Open Mortgages and Their Benefits
National Association of Realtors: Mortgage Types and Loan Options for Homebuyers
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