A borrower is approaching the end of their mortgage term and is concerned about potential increases in interest rates before renewal. They consider a product that offers the stability of a fixed rate for their current term, but also provides the option to switch to a variable rate if market conditions become more favourable later. What type of mortgage feature allows for this flexibility during the term?

Question: A borrower is approaching the end of their mortgage term and is concerned about potential increases in interest rates before renewal. They consider a product that offers the stability of a fixed rate for their current term, but also provides the option to switch to a variable rate if market conditions become more favourable later. What type of mortgage feature allows for this flexibility during the term?

Answer options:

• An open mortgage ✅ A convertible mortgage
• A closed mortgage
• A collateral mortgage

Correct answer: A convertible mortgage

Explanation: A convertible mortgage provides the borrower with the flexibility to convert from a variable rate to a fixed rate, or sometimes from a fixed rate to a variable rate, at certain points during the term without facing prepayment penalties.