Closed Mortgage
Canadian mortgage term definition with formula, examples, and limits used by mortgage brokers.
Definition
A mortgage with restrictions on extra payments and early payoff. Lower rates than open mortgages. Prepayment privileges (e.g., 10-20% lump sum annually) are written into the contract.
Example
Most Canadian mortgages are closed with 15-20% annual prepayment privilege, allowing lump-sum payments each year.
Related Terms
GDSMonthly housing costs divided by gross monthly income. Includes mortgage payment, property tax, heating, and 50% of condo fees.TDSAll monthly debt payments divided by gross monthly income. Includes housing costs plus credit cards, car loans, lines of credit, and other debts.LTVTotal mortgage debt divided by property value. Determines if CMHC insurance is required and which lenders qualify.CMHC InsuranceMandatory mortgage default insurance required when down payment is less than 20% (LTV > 80%). Enables up to 95% LTV financing.Stress TestBorrowers must qualify at a higher interest rate to ensure affordability if rates rise. Calculated as the maximum of contract rate + 2% or 5.25%.
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