Closed-End Mortgage

AAA

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".

INVESTOPEDIA EXPLAINS '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

    A debt instrument, secured by the collateral of specified real ...
  2. Tandem Loan

    Two loans taken out on one asset, which is usually a house; the ...
  3. Balloon Mortgage

    A type of short-term mortgage. Balloon mortgages require borrowers ...
  4. Second Mortgage

    A type of subordinate mortgage made while an original mortgage ...
  5. Piggyback Mortgage

    A type of mortgage where a second mortgage or home equity loan ...
  6. First Mortgage

    A mortgage in a first lien position on the property that secures ...
Related Articles
  1. Mortgages: Fixed-Rate Versus Adjustable-Rate
    Credit & Loans

    Mortgages: Fixed-Rate Versus Adjustable-Rate

  2. Understanding Your Mortgage
    Personal Finance

    Understanding Your Mortgage

  3. Mortgages: How Much Can You Afford?
    Budgeting

    Mortgages: How Much Can You Afford?

  4. The Benefits Of Mortgage Repayment
    Home & Auto

    The Benefits Of Mortgage Repayment

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center