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Closed or open mortgage: Which one is right for you? (so you can save money) - YouTube
Channel: Homebuyer's School
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Welcome to Homebuyer's School brought
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to you by Brookfield Residential.
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So before we begin, if this is your first time
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Hi everyone, welcome to another edition
of Homebuyer's School.
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Today I'm joined by Mutjaba Syed
Manager Mobile Mortgage Specialist
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with TD Canada Trust, and today the
question we're gonna answer is,
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What's the difference between open and
closed mortgage rates?
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So Mo, what is that difference?
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Yeah, so it's a great question.
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The difference the main
difference between open mortgage and a
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closed mortgage is that in open mortgage
is there's not really a term attached to
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it. You could actually leave that lender
at any time without any penalties
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incurred. A closed mortgage just means
that technically you've signed a
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contract with the bank to be there
for a certain time period so if you
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decided to go with a 5-year term you
have to kind of stay with your 5-year
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term and then decide after that if you
want to stick with the same bank or kind
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of go somewhere else, but with an open
mortgage it's just--you can actually
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move at any time without actually
incurring any penalties.
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So when should I pick an open versus a
closed mortgage rate?
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Yeah, so it's--mostly what I would
recommend to my clients is that if
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they're thinking of what's selling any
time soon or leaving, or they're thinking
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about moving out of the country or
moving cities, an open mortgage is a very
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good option at that time so you can get
in for a very short time period and
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actually get out without paying heavy
penalties to get out. Once again it's a great
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conversation to actually have with your
lender at that time and let them know
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about your future plans as well and that
could help you determine what the best
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rates are for you guys, if open makes
more sense or close makes more sense.
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Does an open or closed mortgage rate
have anything to do with a fixed or
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variable mortgage rate or completely
simply separate things?
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Yeah so there are actually--that's a
great question, so we have an open fixed
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mortgage rate and we also have open
variable mortgage rates. They are--
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predominantly it's going to be a little
bit higher than the closed fixed
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mortgage rates and closed variable rates,
and the reason is because banks offer
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discounts for clients--to attract clients
when you're going with an open mortgage
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rate, there's no loyalty, what banks
technically finds so it's going to be a
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little bit higher and technically in
line with what all the banks are
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offering, so it's not going to be a
discounted rate at all you know, it will
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be a little bit of a higher rate than the fixed, the closed fixed with a closed variable.
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So in an open mortgage rate, say
halfway through that term that you
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signed, you can just switch to another bank?
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Yeah absolutely, you could switch to a
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different lender which you feel like has
better rates for you, has better terms for
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you. You can sell your home, you could do
any of those things to actually get out of
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that mortgage, without any penalties.
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So why did the banks actually provide the
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option of a open? Because wouldn't the
banks want to you know, lock you into a
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mortgage with that particular bank?
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Yeah absolutely--
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but I think at the end of the day what
we want to do is we want to
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actually give options to our clients,
whatever it's going to be best fitted
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for their needs. A lot of different life
situations can happen where options are
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a great thing to have.
So for banks we want to be able to know
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what's best for them.
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So Mo do you have
anything else to add in terms of
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open and closed mortgage rates?
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Yeah absolutely, I would just recommend
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speaking with your specialist and bank
or lender and see what's best for you, it
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kind of fits in with your guys
budgeting, with your plans
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or future plans, and determine
which kind of rates are going to be ideal
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for your situation.
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Perfect well thank
you very much Mo.
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Thank you very much everyone for joining
us, remember to watch our video on the
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new mortgage rules in Canada.
Have a good day.
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That's another edition of
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Homebuyer's School.
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Tune in next time for more expert
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tips and tricks and visit
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homebuyersschool.ca to bring you one
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step closer to finding your dream home.
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let us know if you have any home buying
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