Closed Mortgage
A closed mortgage is a mortgage where full repayment or large prepayments are restricted during the term. Most closed mortgages allow limited prepayments each year, but penalties can apply if you break the mortgage early or exceed the allowed limits.
Because the lender has more certainty, closed mortgages often offer lower interest rates than open mortgages. The trade-off is reduced flexibility if your plans change during the term.
Why this matters:
Life changes. Moving, refinancing, or switching lenders can trigger penalties on a closed mortgage. Knowing the rules up front helps you choose a term and lender policies that match your likelihood of change.
Related Mortgage Terms
Often confused with:
Open Mortgage — Open mortgages are more flexible, typically with higher rates.
Closely related:
Mortgage Term — The restrictions apply during the term.
Refinancing — Refinancing during a closed term can trigger penalties.
Next step:
Open Mortgage — Compare flexibility versus cost.