In real estate finance, an open mortgage is a mortgage loan that allows the borrower to prepay the debt in whole or in part without incurring a prepayment penalty. This feature gives the borrower flexibility to refinance or pay off the loan early.
Open mortgages are often attractive to borrowers who anticipate changes in interest rates or expect to have additional funds available in the future. Because the lender faces a greater risk of early repayment, open mortgages may carry different interest terms than loans with prepayment restrictions.
