by BoatSurfer600
via bnnbloomberg:
Some consumers with variable-rate mortgages at Canada’s biggest banks are tacking unpaid interest onto their mortgage’s principal instead of paying the full amount each month. Others are paying interest only.
The tactics are becoming more common as borrowers try to navigate a massive surge in mortgage rates that has ramped up costs and sent house prices falling. It’s a particular issue in areas such as the U.K. and Canada where a chunk of the mortgage debt is floating rate, meaning homeowners are regularly forced to confront the reality of much higher borrowing costs. And it’s a problem skirted by consumers in the U.S., where it’s easier to snag a 30-year mortgage that has a fixed rate.
By allowing borrowers to add unpaid interest onto a loan’s principal or stop paying down the principal each month, lenders are helping to stave off defaults and any forced selling. That’s helping consumers more easily adjust to higher costs — though at some banks, there are limits.
“This is a group effort because the problem comes when panic strikes,” said Arjun Saraf, chief financial officer of New Haven Mortgage Corp., a Toronto-based private mortgage lender. “Lenders have become more flexible and are realizing that they have to do what they can to accommodate good-paying borrowers to remain in their homes.”