标题: What are Fixed, Variable,Open or Closed [打印本页] 作者: 朱威 时间: 2003-9-11 07:18 标题: What are Fixed, Variable,Open or Closed Fixed Rate Mortgage
Fixed-rate mortgages can be open or closed.
They offer you the security of locking in your interest rate for the term of your choice, so you'll know exactly how much principal and interest you'll be paying on your mortgage during the term you select.
Closed fixed-rate mortgages are available for terms of 6 months to 25 years. Open fixed-rate mortgages are available for terms of 6 months and 1 year.
If you think interest rates are on the rise, you may want to protect yourself by locking in your fixed rate for a long time. If you think interest rates are going down, a shorter term may be a good idea.
Variable Rate Mortgage
Generally, variable-rate mortgages are open.
If you choose a variable-rate mortgage:
· You can fix your payments for up to two years in advance, but the interest rate may change from month to month, depending on market conditions.
· Your monthly payments will remain the same, but the portion of the payment that's applied to reducing the principal can vary.
When interest rates are on their way down, a variable-rate mortgage could end up saving you thousands of dollars. But if rates go up, more of each monthly payment will go toward paying the interest.
Variable-rate mortgages are only available for terms of one or two years. Because they are open, you can pay them off--or convert to a fixed-rate mortgage--at any time without interest penalty.
Open or Closed Mortgages
Is an open or closed mortgage best for you? Take a look at what each type offers.
"Open" mortgages
An open mortgage allows you the flexibility to pay off some or all of the mortgage loan at any time, without cost.
· Open mortgages have short terms of 6 months or 1 year, and usually have a slightly higher fixed interest rate than closed mortgages of a similar term.
· Variable rate open mortgages with 1 or 2 year terms are also available.
Here are two situations where the flexibility of an open mortgage could save you a substantial amount of money on interest costs:
· when you're planning to sell your home soon without buying another
· when you think you may be able to pay down a considerable portion of your mortgage debt in the near future
"Closed" mortgages
A closed mortgage gives you the security of locking in your interest rate for a longer term.
· Closed mortgages have terms ranging anywhere from 6 months to 25 years.
· You'll get a lower interest rate with a fixed-rate closed mortgage than you would on a fixed-rate open mortgage.
A closed mortgage is probably flexible enough for you if you plan to remain a homeowner for a few years and your financial situation is unlikely to change.
You'll still have the opportunity to save money on interest costs by reducing your mortgage principal in a variety of flexible ways, without penalty.
Flexible Prepayment
Want to be mortgage-free sooner? You can reduce the number of years to pay down your mortgage (which can be as long as 25 years)
and enjoy substantial savings by:
· Increasing the amount of your mortgage payments
· Selecting a non-monthly or accelerated payment schedule
· Increasing your payment frequency
· Making lump-sum prepayments
· Making Double-Up payments
· Selecting a shorter amortization at renewal
Using all of the flexible payment options to the fullest may enable you to prepay as much as 20% or more of your original mortgage balance each year - all the prepayment flexibility most people will ever need.