Closed mortgage

The idea behind a closed mortgage is to lock you in for a specified time. Banks especially like these mortgages because they have an element of certainty-you commit for a certain period of time (usually three or five years) and they know that the money is out in the market for that time frame. They can then calculate to the penny what their profit will be on the loan, because they know what they paid for the money and how much you will pay them. A closed mortgage does not allow you the option of paying off the mortgage before the term expires. If you have a mortgage like this and want to sell your home during course of the term, you must obtain the consent of the lender. That consent may cost you-big time. The lender has no obligation to consent until the maturity of the term.
Generally, a lower interest rate is available with a closed mortgage.

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