Quote:
Originally Posted by 2ArmBands
You’ll have to pardon my ignorance. I’d like to understand what is happening here. You mean to tell me 23% of all mortgages held at TD have amortization periods over 30 years? Are you even able to get a new mortgage with amortization over 25 years? I didn’t think that was even an option. What is causing this? People are essentially not able to pay their mortgage with new rates and they have to re-amortize to that long to maintain their payment? What is the play here…. Take a 3 year term on 30 plus year amortization and hope the rates go down and amortize back down?
Just curious more than anything. I’m just a standard dude that just takes the hits/gains on a new rate every few years and just keep paying.
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Variable rate holders. A lot of variable mortgages (or maybe basically all of them) use fixed payments. So if rates increase, your payment stays the same but your amortization increases because you're paying down less principal every month. So as rates increase dramatically, these people are paying less and less principal, so at their current payments, it'd take 35, 45, 55, or more years to pay it down. There's a bit more to it than that, but that's the basica idea.
The rub is, when they go to renew, they can't get a 50+ year mortgage, so to get back under into the standard amortization limits of 25-30 years, their payments will need to increase significantly unless rates drop between now and then.