DEFINITION of 'Closed-End Mortgage'

A restrictive type of mortgage that cannot be prepaid, renegotiated or refinanced without paying breakage costs to the lender. This type of mortgage makes sense for homebuyers who are not planning to move anytime soon and will accept a longer term commitment in exchange for a lower interest rate. Closed-end mortgages also prohibit pledging collateral that has already been pledged to another party.

Also known as a "closed mortgage".

BREAKING DOWN 'Closed-End Mortgage'

A closed-end mortgage can have a fixed or variable interest rate and, along with open and convertible mortgages, is common in Canada. An open mortgage can be repaid early but will have a higher interest rate, while a convertible mortgage blends characteristics of closed and open mortgages.

RELATED TERMS
  1. Mortgage Rate

    The rate of interest charged on a mortgage. Mortgage rates are ...
  2. Second Mortgage

    A type of subordinate mortgage made while an original mortgage ...
  3. No-Cost Mortgage

    A mortgage refinancing situation in which the lender pays the ...
  4. Mortgage Banker

    A company, individual or institution that originates mortgages. ...
  5. Mortgage Originator

    An institution or individual that works with a borrower to complete ...
  6. Third-Party Mortgage Originator

    1. A person or company involved in the process of marketing mortgages ...
Related Articles
  1. Personal Finance

    Shopping for a Mortgage in 2017? Use This Tool First

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2017 can all be done online.
  2. Personal Finance

    5 Things You Shouldn't Tell Your Mortgage Broker

    Applying for a mortgage can be a strenuous process. Here are five things to avoid doing when meeting with your mortgage broker.
  3. Insights

    How Interest Rates Affect the Housing Market

    Understand how rate changes can affect home prices and learn how you can keep up.
  4. Personal Finance

    7 Mortgage Trends To Expect In 2011

    How will the year compare to 2010? What's likely to be different?
  5. Personal Finance

    How Do Mortgage Lenders Get Paid and Make Money?

    When homebuyers educate themselves on how mortgage lenders get paid and make money, they are more likely to save thousands of dollars on their mortgages.
  6. Personal Finance

    Score a Cheap Mortgage, Here’s How

    Hidden costs can create what looks like a good deal. Find out how to find the best mortgage possible.
  7. Retirement

    Additional Streams of Income for Seniors

    Find out how a reverse mortgage can work in your favor during retirement.
  8. Personal Finance

    Comparing Reverse Mortgages vs. Forward Mortgages

    Which one a homeowner chooses depends on where you are at this point in your life, personally and financially.
RELATED FAQS
  1. If My Mortgage Lender Goes Bankrupt, Do I Still Have to Pay My Mortgage?

    Yes, if your mortgage lender goes bankrupt you do still need to pay your mortgage obligation. Here's what usually happens ... Read Answer >>
  2. What are the different types of subprime mortgages?

    Clarify your understanding of subprime mortgages. Learn about the different types, how they work and when they might be beneficial. Read Answer >>
  3. What is an assumable mortgage?

    The purchase of a home is a very expensive undertaking and usually requires some form of financing to make the purchase possible. ... Read Answer >>
Trading Center