What is a Fixed Rate (Closed) Mortgage?
With a fixed-rate mortgage you benefit from the security of locking in your mortgage interest rate for a predetermined length of time, usually ranging from six months to five years. Other terms such as three months, or six, seven and 10 years are also available. If you think interest rates will increase, you may want to choose a longer term, such as a five-year term. If you think that rates are going to decrease or remain relatively stable for a long period of time, you may want to choose a shorter term.Most lenders will allow you to make additional payments on your mortgage without any penalty. These could amount to as much as 25 per cent of your original mortgage amount (depending on the institution). However, if you want to pay more than the annual allowable maximum, or pay off the entire mortgage at any time, you will generally have to pay a penalty. Make sure you understand this before choosing your term.