Canadian Rollover Mortgage
- A home mortgage with an adjustable rate feature. The Canadian Rollover mortgage differs from a 30-year fixed rate mortgage, in that the loan's interest rate is adjusted every five years, with no cap on the interest rate adjustment. The Canadian Rollover Mortgage is also known as a Variable Rate Mortgage or a Renegotiable Rate Mortgage.
The Canadian Rollover Mortgage is called such as it is the standard mortgage in Canada. Adjustable Rate Mortgages (ARM's) in the U.S. are usually linked to an index such as the Consumer Price Index (CPI) and adjust every year after a lock-out period (usually 3, 5, or 7 years). The rate on the Canadian Rollover Mortgage is actually renegotiated, typically once every five years.
Canadian Rollover Mortgages are one kind of rollover mortgage. Other mortgages that belong to this group are the aforementioned ARM, the variable rate mortgage, and the renegotiable rate mortgage. All of these mortgages were developed, in part, to allow a larger group of borrowers to participate in the housing market. When real estate gets too expensive for borrowers (either due to price appreciation or high interest rates) mortgage providers get creative with mortgage structures to entice people to borrow.
Investment dictionary. Academic. 2012.
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