Make a decision that best fits your mortgage needs
Understanding The Basics
Choose the right path for you
There are characteristics of your mortgage you should consider in addition to the type of mortgage you select. Learn the basics about mortgages to make the decision that best fits your needs.
Open mortgages
- 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
An open mortgage is right for you if you are looking to pay off your mortgage in the near-term.
Closed mortgages
- 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
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.
A short‑term mortgage (two years or less) offers flexibility for borrowers who prefer a shorter commitment or anticipate changes in their financial situation. It renews more frequently, which means your rate could increase or decrease at renewal. A short‑term option may suit you if you value flexibility and are comfortable with the possibility of future rate changes.
A long‑term mortgage (three years or more) provides payment stability for a longer period, which can help you plan your budget with confidence. Because your rate is set for a longer term, your payments stay the same until renewal. Keep in mind that longer terms may offer less flexibility if you expect changes in your financial situation or think you may need to modify your mortgage before the end of the term.
Monthly payment options
| 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| Monthly | A monthly mortgage payment is when your mortgage payment is withdrawn from your bank account on the same day of every month.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. |
Weekly payment options
| Payment frequency | Description |
|---|---|
| Accelerated weekly payment option | Your payment is made every week, and because there are 52 weeks in a year, you make 52 payments. The payment amount is calculated by dividing your monthly mortgage payment by four, and the amount is withdrawn from your bank account every week. This results in making the equivalent of one extra monthly payment every year, helping you pay down your mortgage faster. You make a payment every 7 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 |
| Accelerated weekly | $1,000 ÷ 4 | 52 | $250 paid every second week | $13,000 |
| Accelerated bi-weekly | $1,000 ÷ 2 | 26 | $500 paid every second week | $13,000 |