Can't decide between a closed, open or convertible mortgage? There are many factors to consider such as your financial goals and how soon you want to pay off your mortgage. Here’s a quick recap of the products available to you through RBC Royal Bank...
#1 CLOSED MORTGAGE
Closed-term mortgages are usually the better choice if you're not planning to pay off your mortgage in the short term. Interest rates for closed term mortgages are generally lower than for open term mortgages. Closed term mortgages offer you the ability to save on interest costs and pay off your mortgage faster. You will pay a prepayment charge if you wish to renegotiate your interest rate or pay off your mortgage balance prior to the end of its term.
#2 CONVERTIBLE CLOSED MORTGAGE
A convertible mortgage gives you the same benefits as a closed mortgage, but can be converted to a longer, closed term at any time without prepayment charges.
#3 OPEN MORTGAGE
Open term mortgages may be appealing if you are planning to pay off your mortgage in the near future. They can be repaid either in part or in full at any time without prepayment charges. Open mortgages can be converted to any other term, at any time, without a prepayment charge. Interest rates for open mortgages are generally higher than for closed mortgages because of the added pre-payment flexibility.
-FIXED RATES-
The interest rate for a fixed rate mortgage is locked in for the full term of the mortgage. Payments are set in advance for the term, providing you with the security of knowing precisely how much your payments will be throughout the entire term (breakage costs apply if paid off prior to maturity). Fixed rate mortgages can be open (may be paid off at any time without breakage costs).
-VARIABLE RATES-
With a variable rate mortgage, mortgage payments are set for the term, even though interest rates may fluctuate during that time. If interest rates go down, more of the payment is applied to reduce the principal; if rates go up, more of the payment is applied to payment of interest. Variable rate mortgages may be open or closed. A variable rate mortgage provides you with the flexibility to take advantage of falling interest rates and to convert to a fixed rate mortgage at any time (breakage costs apply if paid off prior to maturity). Variable rate mortgages can also be open (may be paid off at any time without breakage costs).
-RATE CAPPER VARIABLE RATE-
RBC Royal Bank's innovative RateCapper mortgage is a variable rate mortgage with a built-in safety net. Essentially, RateCapper establishes a maximum rate for a five-year term, so, if mortgage rates go up beyond that maximum during the term, you're protected. If rates go down, your rate goes down just as it would with a variable rate mortgage. The interest rate applicable to a RateCapper mortgage will never be higher than the RateCapper Maximum Rate, even if the Prime Rate plus the applicable interest rate premium is higher than the RateCapper Maximum Rate. If the Prime Rate plus the applicable interest rate premium falls below the RateCapper Maximum Rate, the interest rate will once again be the Prime Rate plus the applicable premium (breakage costs apply if paid off prior to maturity).