Now, in the face of crippling interest rates, some existing homeowners are seeing their amortization period go as high as 90-years as their ‘fixed-payment’ variable-rate mortgages adjust automatically to rising interest rates.
Homeowners with a variable-rate fixed-payment are in a riskier position during a high-interest-rate period, experts say, because they are seeing a greater percentage of their monthly payment go toward interest and not principal — and for a longer period of time. “The major banks that offer this product aren’t extending the amortizations by choice,” she said. “It’s just how the product works. It changes automatically in their system.”, said mortgage broker Victor Tran of Ratesdotca. When this happens, the lender sends a notice that their monthly mortgage payments need to change.
Once a homeowner has hit their trigger rate, it’s unlikely the amortization can be extended unless it’s an exceptional circumstance, he said. report in which it named housing as the number one risk it is monitoring in the coming year and said it is “actively assessing the risks posed by variable rate fixed payment mortgages” to determine whether revisions are warranted.
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