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.
“We’ve seen 60 years, 70 years, and we did see someone with 90 years,” said mortgage broke Ron Butler. “The majority of mortgages at some of the major banks are being extended and homeowners are getting concerned.”
There are two types of variable rate mortgages, experts say, one is a variable-rate fixed-payment mortgage, the other an adjustable-rate mortgage — a “floating” payment that rises and falls with changes in the prime rate.
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.
“A month ago I came across someone with an 87-year amortization,” said mortgage broker Mary Sialtsis. “That’s a problem. Even if they like having their mortgage payment stay the same it’s still being adjusted because now they’re paying much less principal and are more in debt.”