Closed Mortgage (1 to 5 year terms are most common but can go as high as 10+ years)
These types of mortgages have structured repayment schedules with specific amounts due on a weekly or monthly basis. They usually have the lowest interest rate available but cannot be prepaid or discharged before the end of the term without having to pay a significant penalty. Ideal for purchasers who need to lock in their mortgage costs for long-term cash-flow planning. While most closed mortgages have lower interest rates and pre-payment privileges such as 10% anniversary payments or monthly double-up payments, they do not have the complete repayment flexibility found in open mortgages.

Variable Mortgage (6 month to 1 year terms are most common)
With this type of mortgage the interest rate is directly linked to the money market rates and can fluctuate on a weekly or daily basis. While this is usually the best rate available, long-term upward swings in interest rates could be quite costly. On the plus side, long-term downward interest rate swings could mean large savings as your mortgage rate follows the market down. With fixed-rate mortgages, a predetermined amount of each monthly payment goes to the interest and the rest is applied to the principle. With a variable rate mortgage the monthly payments are still fixed but, as the interest rate goes up, more of the regular payment will be applied toward the interest. If the interest rate goes down, more of the regular payment will be applied toward the outstanding principal.

There are alternative mortgage products available that can combine different features from the above types of mortgages. Financial institutions may even be willing to customize one of their products in order to meet your specific needs. Call your bank or mortgage specialist for more detailed information.