Compare 5-year Variable Open

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What is a 5-year variable-rate open mortgage?

An open 5-year variable mortgage has some similarities and some differences compared to the popular 5-year closed mortgage.

On the one hand, both are variable, or “floating” rate mortgages, meaning the rate can fluctuate over the term if prime rate rises or falls. This could affect your monthly mortgage payments, unless you have a fixed-payment variable rate. In that case, if prime rate rose, the amount of your monthly payment going towards interest cost would increase and the amount going towards principal would decrease.

The main difference is that 5-year variable-rate open mortgages allow the borrower to repay as much of the loan back at any time without facing a penalty. That said, the loan is still based on scheduled payments over the five-year term.

If the flexibility of being able to repay your mortgage at any time is important to you, another option could be obtaining a Home Equity Line of Credit (HELOC). A HELOC lets you borrow against your home equity. HELOC interest rates fluctuate because they are quoted as a discount or premium to the prime rate. Borrowers can repay their HELOC as quickly or slowly as they want, as only the interest cost must be paid each month.

Find out if a HELOC is right for you.

Pros of a 5-year variable-rate open mortgage

Are you debating whether a 5-year variable-rate open mortgage is for you? Here are a few advantages to consider.

  • Flexibility: When it comes to paying off your mortgage, having an open mortgage means you can make more frequent payments or make a large one-time lump-sum payment without incurring any penalties.
  • Refinance at any time: For those who want the freedom to refinance their mortgage at any time, a 5-year variable-rate open mortgage is a good choice, as there's no penalty should you want to refinance early.

Cons of a 5-year variable-rate open mortgage

Here are a few disadvantages of a 5-year variable-rate open mortgage.

  • Risk of rising rates in the future: Your interest costs could potentially soar if interest rates were to rise, since variable rates fluctuate as the prime rate rises and falls.
  • Higher rates: Because open mortgages offer the ultimate flexibility when it comes to prepaying your mortgage, the interest rate is significantly higher compared to closed mortgages.

Learn more about 5-year variable mortgages.

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