Convertible Mortgage

Explore convertible mortgages in Canadian real estate — what they offer, when they’re used, and their benefits for borrowers.

Convertible Mortgage

July 27, 2025


What is a Convertible Mortgage?

A convertible mortgage is a loan that starts with a short-term, often variable rate, giving the borrower the option to convert to a longer-term fixed rate without penalty during the term.

Why Convertible Mortgages Matter in Real Estate

In Canadian financing, convertible mortgages offer flexibility to adapt to changing interest rates and borrower needs.



Key features:
  • Starts with short-term or variable rate
  • Option to lock in fixed rate later
  • May have slightly higher initial rate than traditional variable loans



Understanding convertible mortgages helps borrowers balance flexibility and stability.

Example of a Convertible Mortgage in Action

The buyer chose a convertible mortgage, planning to switch to a fixed rate if interest rates began to rise.

Key Takeaways

  • Starts flexible, option to lock fixed rate
  • Helps manage interest rate risk
  • Useful in uncertain rate environments
  • May have slightly higher initial rate
  • No penalty for conversion during term

Related Terms

Additional Terms

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Mortgagee in Possession

A mortgagee in possession is a lender who takes control of a property after borrower default, but before foreclosure or power of sale. The lender. more

Lease Surrender Agreement

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Green Infrastructure

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Escrow Holdback

An escrow holdback is a portion of funds withheld at closing and held in escrow until specific conditions are met, such as completion of repairs,. more

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