You can prepay any amount of your mortgage at any time without incurring a penalty with an open mortgage. The disadvantage of having an open mortgage is that interest rates are higher to compensate for the flexibility to pay it off whenever you choose.
With a closed mortgage, the interest rate is typically lower than an open mortgage since you’re restricted by how much more you can pay towards your loan each year. As a result of this compromise, you’ll be subject to a prepayment restriction. This implies that you may only pay a set proportion of your original or current amount each year, on average 15%, but this varies based on your lender. If you have the option, always choose the original balance prepayment plan since it will allow you to pay down more in a year, resulting in lower interest expenses over time. Avoid prepayment penalties by knowing your mortgage’s limitations and staying within your yearly limit.