Understanding The Basics
Choose the right mortgage option for you
Open vs. closed mortgage terms
Open mortgages:
An open mortgage is right for you if you are looking to pay off your mortgage in the near-term.
- Can be paid off in part or in full at any time with no prepayment charges
- Can be converted to another mortgage type at any time without prepayment charges
- Generally have a higher interest rate
Closed mortgages:
A closed mortgage may be right for you if you are looking to keep your interest costs to a minimum and pay down your mortgage faster.
- Are the most popular type of mortgage
- Generally offer a lower interest rate than open mortgages
- Are subject to prepayment charges if you choose to pay it off prior to maturity, refinance your home or transfer your mortgage to another lender
Short-term vs. long-term
Our mortgage products have term lengths ranging from one to five years.
A short-term mortgage has a term length of two years or less. It might be right for you if you think mortgage interest rates might decrease by the end of your term.
A long-term mortgage has a term length of three years or more. It might be right for you if you feel interest rates are at a reasonable level, and you want the security of managing your payments over a longer period of time.Payment frequencies
| Payment frequency | Description |
|---|---|
| Monthly | A monthly mortgage payment is when your mortgage payment is withdrawn from your bank account on the same day of every month. With a monthly mortgage payment, you make 12 payments per year. |
| Semi-monthly | A semi-monthly mortgage payment is structured to be paid on two dates per month, such as the 1st and 15th. You would make 24 payments per year. |
| Payment frequency | Description |
|---|---|
| Bi-weekly | A bi-weekly mortgage payment is when your mortgage payment is multiplied by 12 months and divided by the 26 pay periods in a year. With a bi-weekly mortgage payment, you make 26 payments per year, every 14 days. |
| Accelerated bi-weekly | Your payment is made every second week, and because there are 52 weeks in a year, you make 26 payments. The payment amount is calculated by dividing your monthly mortgage payment by two and the amount is withdrawn from your bank account every two weeks. This results in making the equivalent of one extra monthly payment every year. You make a payment every 14 days. |
Understanding Mortgage Payments
When you make more frequent mortgage payments, you are paying more towards your principal, thus, saving you thousands in interest and shortening the amount of time it takes to pay off your mortgage. The following table shows how a $1,000 mortgage payment is managed with different payment schedules.
| Option | Formula | Payments per year | Amount per payment | Total paid per year |
|---|---|---|---|---|
| Monthly | $1,000 ÷ 1 | 12 | $1,000 paid once per month | $12,000 |
| Semi-monthly | $1,000 ÷ 2 | 24 | $500 paid twice per month | $12,000 |
| Bi-weekly | $1,000 x 12 ÷ 26 | 26 | $461.54 paid every second week | $12,000 |
| Accelerated bi-weekly | $1,000 ÷ 2 | 26 | $500 paid every second week | $13,000 |