45-year mortgages are becoming more common in Canada as negative amortization rises

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by TonyLiberty

45-year mortgages are becoming more common in Canada as negative amortization rises — It’s a ticking time bomb.

Negative amortization happens when the monthly payments are not enough to cover the interest, so the principal amount of the loan actually increases over time.

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This can happen when interest rates rise or when the borrower has a variable-rate mortgage and interest rates increase.

20% of mortgages at the big 3 Canadian banks are now negatively amortizing. This means that 12% of Canada’s total mortgage debt is amortized for 35 years or longer (instead of the standard 25 years).

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