# When does the 'Open Rate Premium' become worth it for you?

> Open rates cost ~2% more (roughly $10,000/year on $500K) — only worth it if you expect to sell, refinance, or pay off within 12 months.

Category: Product Mechanics
Last verified: 2026-04-14
Source: https://ratellow.com/faqs/product-mechanics/when-does-the-open-rate-premium-become-worth-it-for-you

## Answer
| Scenario         | Cost Details                | Comments                                  |
|------------------|----------------------------|-------------------------------------------|
| 2% Premium (Closed)  | ~$10,000/year (~$833/month) | 2% of $500,000 is $10,000/year, but this is a simplified estimate; actual premiums vary by lender and product |
| Early Break of 5-year Term (Year 2) | Penalty depends on IRD or 3 months interest; for a 4.29% rate on $500k, IRD penalty could be roughly $10,000-$15,000 but varies by lender and contract | Break cost scenario for closed products    |
| Open Mortgage    | No penalty cost             | Open mortgages have no penalties but higher interest rates; 'mathematically superior within 18 months' is a generalization and depends on rate differential and break timing |


## Related guide
- https://ratellow.com/guides/open-vs-closed-mortgages

## Sources
- BANKOFCANADA — https://www.bankofcanada.ca/2023/12/staff-analytical-note-2023-19/#Introduction