Description: Negative amortization is pushing some Canadian homeowners to longer and longer mortgages. When rising interest rates eat up more and more of a fixed payment from a client, the life of the mortgage gets extended to allow more time to pay off the principal. Homeowner Michael Girard-Courty now finds that only $27 of his $ 1,156 monthly payment on his variable rate mortgage is going to the principal, driving up the term of the mortgage to 47 years versus the original 25. Mortgage broker Patrick Betu would like to see the government outlaw the prospect of negative amortization.
Date: October 5, 2023
1) Had you been aware that there was such a thing as negative amortization?
2) As you look forward to moving into the workforce after your time as a student, would you consider taking on a 47-year mortgage to get into your first home?
3) Page 10-17 of Wiley’s Financial Accounting: Tools for Business Decision-Making has an inset box at the bottom of the page titled “Personal Mortgages.” What was the average mortgage on a home in Canada at the end of 2021? Do a quick search to see if you can find what that amount might be right now.