Borrowers want flexibility, and that’s why Canadian mortgage lenders offer a variety of “flex” mortgages. While a flex mortgage isn’t a specific type of mortgage, lenders might name some of their mortgage products as a flex mortgage to indicate that this mortgage provides more flexibility for borrowers.
In most cases, a flex mortgage allows you to pay off your mortgage faster by having a higher annual mortgage prepayment limit before mortgage penalties apply. Having a higher prepayment limit than non-flex mortgages means that borrowers can make larger prepayments that will reduce their mortgage principal, saving them interest and allowing them to pay off their mortgage faster.
Things to look for when seeing how flexible a mortgage really is:
The CIBC Variable Flex Mortgage is a closed variable-rate mortgage that offers a higher prepayment limit than their closed fixed-rate mortgage. With the CIBC Variable Flex Mortgage, the annual prepayment limit is 20% of your original mortgage principal. In comparison, CIBC's fixed-rate closed mortgage has an annual prepayment limit of 10%.
Another feature that CIBC promotes for this flex mortgage is the ability to convert it to a fixed-rate closed mortgage at any time, as long as the new fixed-rate mortgage has a term length of 3 years or longer. It also offers other payment features seen in CIBC mortgages, such as the ability to increase your regular payments by up to 100%.
While weekly and bi-weekly mortgage payment frequencies are available, CIBC does not offer accelerated weekly or accelerated bi-weekly mortgage payments for their flex mortgage. The only term lengths available for CIBC’s Variable Flex mortgage are 3 years and 5 years. As a variable mortgage, the interest rate can change during your term.
The Scotia Flex Value Mortgage is a variable-rate mortgage that comes as either a 5-year closed or 5-year open mortgage. That’s unlike CIBC, which names their closed variable-rate mortgage as a “flex” mortgage, and their open variable-rate mortgage as simply “open.”
At Scotiabank, the difference between their flex and non-flex mortgages has to do with payments rather than prepayment limits. Both the Scotia Flex Value Mortgage and the Scotia Ultimate Variable Rate Mortgage have an annual prepayment limit of 15% of the original mortgage principal.
The Scotia Ultimate Variable Rate Mortgage has fixed payments, even when the interest rate changes. In comparison, the Scotia Flex Value Mortgage has variable payments. This means that your Scotia Flex Value mortgage payment will change when the interest rate changes. This is also known as an adjustable-rate mortgage (ARM). Since your required payment will increase if your rate increases, you won’t fall behind on your amortization, meaning that you will never hit what is called your mortgage’s “trigger rate.”
Another mortgage product that Scotiabank offers with the word “flex” is the 6 Months Flexible/Closed Mortgage. The flexibility provided in this mortgage is the ability to convert to a closed fixed-rate mortgage with a term length of 1 year or longer at any time. This makes it a type of convertible mortgage.
Meridian's Flex Line Mortgage combines both a mortgage with a home equity line of credit (HELOC). Also known as a readvanceable mortgage, this flex mortgage lets you re-borrow more money as you pay down your mortgage by making your regular mortgage payments. This means that you won’t need to re-apply to borrow more money. Instead, you can borrow directly from your home equity.
The Flex Line Mortgage has a maximum loan-to-value (LTV) of 80%. This means that you can borrow up to 80% of the value of your home, combined between your mortgage and the HELOC portion of the Flex Line.
Besides the flexibility of having a HELOC that has its credit limit automatically increased, Meridian’s Flex Line Mortgage also allows for accelerated bi-weekly or accelerated weekly payments. It also comes with a higher annual prepayment limit of 20%.
Just like other lenders, connectFirst Credit Union's Flex Mortgage offers a high yearly prepayment limit of 20% and the ability to increase mortgage payments by up to 20% per year. connectFirst offers their Flex Mortgage with terms ranging from 1 year to 5 years, either as a conventional mortgage (down payment of 20% or more) or as a high-ratio insured mortgage (down payment of less than 20%). You can choose between a fixed or variable mortgage rate.
TCU Financial Group is a Saskatchewan credit union that offers a “Flex Rate Mortgage.” This readvanceable mortgage, similar to the Meridian Flex Line Mortgage, lets you borrow more money through a revolving credit line (HELOC) as your home equity increases.
You can also split your mortgage into multiple "sub loans," with each sub loan being able to have different rates and terms, such as being either open or closed, or a fixed or variable interest rate. You can have up to 5 sub loans. The maximum LTV allowed is 75%. On its own, the revolving credit line can’t be more than 65% LTV.