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Open Mortgages
Definition: an open mortgage can be paid off at any time without penalties. You can also make additional payments without penalties. Open Mortgage terms range from 6 months to 5 years and can have
variable or fixed interest rates. There will still be a minor fee to discharge the mortgage when paying out the mortgage or transferring to another lender. Mortgage interest rates for open mortgages tend to be higher than they are for closed mortgages because of their inconsistency in nature (i.e. it is harder for a lender to forecast returns due to its flexibility in payments).
Closed Mortgages
Definition: closed mortgages have lower interest rates than open mortgages. You cannot pay out a closed mortgage early without a penalty, but you can still pre-pay up to 20% of your original principle balance each year with most lenders. Closed mortgage terms can range from 6 months to more than 10 years. This type of mortgage can only be renegotiated or refinanced before it matures according to its conditions. This type of mortgage is more stable due to its restrictive nature, which is why interest rates are lower than they are for open mortgages.
http://www.mortgagescanada.ca/mortgages/open-vs-closed/
