BMO mortgages: Open vs. Closed terms

BMO mortgages are offered with an option of open, closed, or convertible terms. These are defined in detail below.

BMO open mortgages

Open mortgages give you the freedom to make extra payments and even pay down your mortgage in full, anytime without penalties. Open mortgages are associated with higher rates, but you can pay off your mortgage faster to save money on interest payments. If you expect to receive a considerable amount of cash or your income to increase over the term, an open mortgage allows you the flexibility to pay off your debt faster.

BMO closed mortgages

Closed mortgages, while accompanied by lower interest rates, do not generally allow additional payments. Moreover, there are penalties associated with paying off your mortgage early. They are, however, the more popular of the two due to their lower interest rates.

BMO convertible mortgages

BMO’s convertible mortgage allows you to have a short-term closed mortgage that can be later converted into a longer fixed-rate term without penalty. The benefit of which is to take advantage of potentially low-interest rates.

BMO mortgage rates

As with all the rates displayed on Rates4u.ca, BMO mortgage rates are updated every day and can be found above. You can access these rates conveniently, by either filling out an online mortgage application or only reaching out to a BMO mortgage agent over the phone. Working with an agent has the added benefit of obtaining personalized, expert advice, and gaining access to a wide range of mortgage products from various lenders. To get started, connect with an authorized BMO mortgage broker by clicking on one of the BMO mortgage rates above.

How to Get a BMO Mortgage

BMO mortgage application checklist

Once you have started the application process, BMO will ask you questions relating to what you owe and own; some of the expenses relating to the property, such as heating costs, taxes, and condo fees; also whether you will be using the property to generate income. Additional information BMO will require includes:

• Your last two years T1 and Notice of Assessment

• A current list of your assets and liabilities

• The confirmation of your down payment may include recent bank statements, a Gift Letter, or RRSP withdrawal confirmations.

• Job letter proving current employment and income, including recent payslips

• Documents are proving additional income such as child tax credit etc.

• The details about the property your buying or currently own, including the MLS listing (if applicable) and any associated bills and taxes (e.g., property taxes, heating costs, and condo fees).

More on the Bank of Montreal

Established in Canada in 1817, BMO Financial Group serves upwards of 10 million personal, commercial, corporate, and institutional customers globally. Its operating groups share one universal vision: to be the bank that defines excellent customer experience.

BMO prepayment charges

There are downsides to a fixed-rate mortgage, such as the restriction on paying out your mortgage early. Despite well-thought-out plans, unexpected life events sometimes require a mortgage to be broken and paid out early.

Like all of Canada’s Big six banks, BMO fixed-rate mortgage prepayment charges are calculated on the greater of:

• The interest rate differential (IRD) or

• Three months’ interest

This is based on the difference between the rate the bank could lend at today (the posted rate) and your rate for a term equivalent to the remaining term of your mortgage. The more your rate is above today’s published rates, the higher the IRD charge will be.

The Big six banks are notorious for having high— and astronomical— penalties. Always consider this when you are mortgage shopping or ask your mortgage broker; if there is a chance you may need to break your mortgage early, then you may be better off with a fair penalty lender. Or variable-rate mortgage (which charges three months’ interest penalty to break a mortgage early).

How does BMO set their Prime rate?

Each bank or lender determines its Prime rate. Banks in Canada usually look to the target overnight rate or the Policy Interest Rate set by the Bank of Canada (BoC). Similar changes typically follow changes in the target overnight rate in Prime rates. As a result, most banks and lenders in Canada have similar Prime rates.