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A FIXED RATE
MORTGAGE provides a set interest rate over
the term of the mortgage, while a VARIABLE
RATE MORTGAGE has an interest rate that
will fluctuate during the term. Fixed rate
mortgages are the most popular type of
mortgage. You benefit from the security of
locking in your mortgage interest rate, for
lengths of time ranging from 3 months up to 25
years. The rates are slightly lower than for
an OPEN MORTGAGE for the same term.
Let’s be honest, Variable (Adjustable) Rate
Mortgages are hot. With interest rates being
at rock bottom the past few years, many
consumers have saved a lot of money by having
a variable rate mortgage. Variable
rates are usually based on the lender’s prime
rate, meaning that your rate goes up when the
prime rate goes up.
Most variable rate mortgages start off
at a peculiarly low interest rate that is
called a teaser rate. This low teaser rate
actually makes it easier to qualify for the
mortgage. Another benefit of an adjustable
rate mortgage is that some offer an option to
change the mortgage into a fixed-rate
mortgage.
Mortgage lenders now offer several hybrid
mortgages that combine the features of an
adjustable rate mortgage and a fixed-rate
mortgage. They provide customers with some of
the security of a fixed-rate mortgage at lower
interest rates. Some of these mortgages are
fixed at one interest rate for several years
then convert into an adjustable rate mortgage.
Some are fixed to one interest rate for a term
then are fixed to another for the remainder of
the mortgage.
CLOSED MORTGAGE - A Closed Mortgage
limits your ability to pay off your mortgage
early, whereas an OPEN MORTGAGE gives
you the option of paying off your mortgage in
full at any time . An Open Mortgage allows you
to pay off part or the entire mortgage at any
time without penalties. Open mortgages usually
have short terms of six months or one year.
The interest rates are higher than those for
closed mortgages with similar terms.
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