Information on mortgage prepayment

What's an open mortgage?

You can prepay open mortgages, in part or in full, without a prepayment charge. Open mortgages usually have higher interest ratesOpens a popup. than closed mortgages. But, open mortgages are also flexible. If rates start to increase, you can easily pay off an open mortgage and switch to a closed one.

What's a closed mortgage?

You can't prepay, renegotiate or refinance a closed mortgage before the end of the term without a prepayment charge. But, most closed mortgages have certain prepayment privileges, such as the right to prepay 10% to 20% of the original principal amount each year, without a prepayment charge. A closed mortgage often has a lower interest rate than an open mortgage.

What's a fixed-rate mortgage?

With a fixed-rate mortgage, in most cases your interest rate doesn't change during your mortgage term. Your regular mortgage payment amount doesn't change. You know exactly what your regular payments will be and how much of the principal balance you'll pay off during the term.

What's a variable-rate mortgage?

With a variable-rate mortgage, the interest rate changes as the CIBC pOpens a popup.rime rateOpens a popup. changes. Your regular mortgage payment amount is fixed and doesn't change.

When the CIBC prime rate goes down, you'll pay less interest. A smaller portion of your regular mortgage payment is applied to pay the interest, and a larger portion is applied to pay down the principal.

And, when the CIBC prime rate goes up, you'll pay more interest. A larger portion of your regular mortgage payment is applied to pay the interest, and a smaller portion is applied to pay down the principal.

Why choose a short-term mortgage?

A short-term mortgage generally offers a lower interest rate than a longer-term mortgage. When current rates are high, and you think rates may drop, choosing a short-term mortgage lets you lock in for a shorter period. A short-term mortgage may also be a good option if you plan to sell your home or pay off the mortgage early.

Why choose a long-term mortgage?

A long-term mortgage generally offers a higher interest rate than a shorter-term mortgage. When current rates are reasonably low, choosing a longer-term mortgage secures the interest rate for a longer period of time and makes budgeting easier.