What is an Open Contract?

An open contract—sometimes referred to as an open mortgage—is a loan agreement that provides the borrower with full flexibility to pay off the entire balance or make additional principal payments at any time, without incurring prepayment penalties. This structure enables borrowers to reduce interest costs and pay off their loan early without extra fees.

By contrast, a typical bank-financed mortgage, known as a closed mortgage, locks the borrower into a defined term and payment schedule. Early repayment is generally not permitted, and any prepayment can trigger substantial penalties.

To learn more about the differences between open and closed contracts, visit:
https://legal-resources.uslegalforms.com/o/open-mortgage