Open Mortgage
Canadian mortgage term definition with formula, examples, and limits used by mortgage brokers.
Definition
A mortgage that can be paid off at any time without prepayment penalty. Rates are higher than closed mortgages. Used when the borrower expects to sell or refinance soon.
Standard Limit
Rate premium: 0.75–2.00% above closed mortgage rates
Example
Seller waiting for property sale uses an open mortgage to avoid penalty when proceeds arrive.
Related Terms
GDSMonthly housing costs divided by gross monthly income. Includes mortgage payment, property tax, heating, and 50% of condo fees.TDSAll monthly debt payments divided by gross monthly income. Includes housing costs plus credit cards, car loans, lines of credit, and other debts.LTVTotal mortgage debt divided by property value. Determines if CMHC insurance is required and which lenders qualify.CMHC InsuranceMandatory mortgage default insurance required when down payment is less than 20% (LTV > 80%). Enables up to 95% LTV financing.Stress TestBorrowers must qualify at a higher interest rate to ensure affordability if rates rise. Calculated as the maximum of contract rate + 2% or 5.25%.
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