Canadians fear long-term mortgage debt

Canadians fear long-term mortgage debt

Faced with skyrocketing interest rates for a year and a half, many borrowers are no longer paying back any of the principal on their mortgage or even covering all of their interest, meaning their debt is growing.

This is the case for approximately every fifth mortgage loan in the Czech Republic Canadian Imperial Bank of Commerce (CIBC) and Bank of Montreal (BMO) a Toronto-Dominion (TD). More than $128 billion in home loans offered by these three financial institutions are in negative amortization.

What is negative depreciation?

If you have an adjustable rate mortgage with a fixed amount that you have to pay each month and that monthly payment no longer covers the entire interest, you are now in a negative amortization situation. Your bank will usually add unpaid interest to your mortgage balance, causing your debt to increase month after month.

Michael Girard-Courty fears that another increase in the key rate will push him into this situation. The resident of Joliette, northeast of Montreal, has a variable rate mortgage CIBC for his duplex.

Since the rate has been increasing since her monthly payment is fixed, the proportion allocated to interest has increased. Last month, he paid off only $23 in principal, while paying more than $1,133 in interest.

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