So What Exactly Is A Convertible Mortgage?
A convertible mortgage may be the perfect option if you want the best of both worlds. It offers flexibility and minimal risk and is often accompanied by lower interest rates than an open mortgage. This type of mortgage provides the opportunity to switch to a longer-term closed mortgage without any penalty.
A convertible mortgage is ideal for borrowers who wish to take advantage of lower interest rates but don’t want to be locked into a single rate for the duration of the mortgage. The switch to a closed rate may be done at any time with no penalty or additional fees. Moreover, the interest rate is generally lower than that of an open mortgage, saving the borrower money in the long run.
On the downside, once the borrower switches to a closed rate, they are then locked into that rate for the remainder of the term. If interest rates drop further, the borrower will be unable to take advantage of the new lower rate. Furthermore, if the borrower wishes to pay off the mortgage early, they may be subject to prepayment penalties.
Overall, a convertible mortgage is a great option for those who want flexibility and minimal risk, but should also be weighed against the potential drawbacks. Schedule a call at any time with us to answer any questions you may have.