- A mortgage that allows full or partial debt repayment at any time without penalty. An open mortgage may also allow changes to the payment terms without any extra costs to the borrower.
Related Terms and Acronyms
- Bridge Loan — Definition,
- A loan that "bridges" the gap between the purchase of a new home and the sale of the borrower's current home. The borrower's current home is used as collateral and the money is used to close on the new home before the current home is sold. Some are structured so they completely pay off the old home's first mortgage at the bridge loan's closing, while others pile the new debt on top of the old. They usually run for a term of six months.
- Bridge Mortgage — Definition, Important,
- A short-term loan used to allow a homebuyer to purchase a replacement property while still trying to sell their existing home.
- Closed Mortgage — Definition, Important,
- Closed mortgages involve a strict repayment schedule of a specific amount with optional limited lump sum payments and payment increases.
- Fixed Rate Mortgage (FRM) — Acronym, Very Important,
- A loan in which the interest rate and payments remain the same for the entire life of the loan. The interest rate and payment amounts are set at the time of loan origination.
- Initial Interest Rate — Definition,
- The introductory interest rate on an adjustable-rate mortgage (ARM), which usually changes at a predetermined time.
- Interest Rate Differential (IRD) — Acronym, Very Important,
- The penalty one pays for breaking a mortgage.
- Mortgage (mtg) — Abbreviation, Important,
- A mortgage is a contract stipulating a specific real property, typically a residence or building, as collateral for a loan. The mortgage incurs a rate of interest that varies according to term and other features.
- Penalty — Definition,
- In mortgage terms, a penalty is a set rate or length of time the penalty will be charged based on the remaining loan amount. The penalty is usually three months interest or interest rate differential.