What is the key difference between open-end and closed-end mortgages?

Open-end mortgages are designed to provide borrowers with the ability to access additional funds against the equity they have built in their property. This means that if the property value increases or the borrower pays down some of the principal, they can borrow more money without having to go through a completely new application process and closing. This feature is particularly beneficial for individuals who may need ongoing access to additional cash for renovations, education, or other financial needs.

In contrast, closed-end mortgages are structured with a fixed loan amount that cannot be increased, which means once the borrower takes out the loan, they cannot draw additional funds against that mortgage. This limitation is why the correct answer highlights that open-end mortgages allow for additional borrowing against equity, while closed-end mortgages do not provide that flexibility.

Understanding this distinction is important for real estate professionals and clients alike because it influences financial planning and decision-making regarding property investment and financing options. Open-end mortgages may provide more borrowing flexibility, but could also come with different risks and considerations compared to traditional closed-end mortgages.