Fully Closed or Limited Mortgages
Some lenders will offer mortgages that are considered “fully closed for the term”. This typically means that during your mortgage term, unless you sell your home to a non- related third party, you are not able to repay your mortgage and in some cases move your mortgage to a new home. Sometimes you are able to refinance with the current lender who holds your fully closed mortgage however you are at their mercy in terms of pricing and loan amounts as they know you are not permitted to move your mortgage to any other lender.
These fully closed mortgages are typically offered by two different types of lenders.
The first type of lender that offers this mortgage is a non- conforming speciality lender. These lenders work with clients who have had past credit challenges or who have challenges verifying their income in a traditional manner. To minimize the effect of the fully closed term and to protect our clients we typically approve a one or two year term with these lenders so that our clients have flexibility to modify their mortgage within a relatively short period of time.
The second type of lender is much more potentially dangerous and is typically hidden from most borrowers. These mortgages are offered by some major banks and trust companies. In exchange for clients signing onto a much more restrictive and potentially expensive mortgage for them long term, the lender will give a slight discount on the current rate. The discount is often about 0.1% below the current best rates offered for a normal mortgage. In our years of experience this is generally not a good fit for most clients however these extra restrictive terms are often not clearly explained by the banks and trust companies to the client during the approval process.
When you are in the process of obtaining a new mortgage, especially if you are either seeking the absolute lowest mortgage rate or if you are obtaining a mortgage from a lender that is overlooking some past credit challenges please ensure that you ask your mortgage professional to explain all of the terms and potential drawbacks of your mortgage.
We would love to work with you on your mortgage approval and discuss your options with you. Please feel free to connect with us via our online contact form, phone, or by applying online.