Rollover Mortgage

AAA

DEFINITION of 'Rollover Mortgage'

A mortgage in which the unpaid balance (outstanding principal) must be refinanced every few years (often three to five) at current interest rates, subject to certain limits. For example, the mortgage interest rate may not increase by more than 0.5% per year or by more than 5.0% over the life of the loan. The life of a rollover mortgage is commonly 30 years.

INVESTOPEDIA EXPLAINS 'Rollover Mortgage'

The purpose of a rollover mortgage is to reduce the mortgage lender's interest-rate risk by passing some of that risk on to the borrower (variable-rate mortgages have a similar purpose). When interest rates are falling, this type of loan benefits the borrower, but when they are rising, it can harm the borrower. An example of a rollover mortgage is the Canadian rollover mortgage, which is a common type of renegotiable-rate mortgage in Canada.

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Balloon Mortgage

    A type of short-term mortgage. Balloon mortgages require borrowers ...
  3. Refinance

    1. When a business or person revises a payment schedule for repaying ...
  4. Principal

    1. The amount borrowed or the amount still owed on a loan, separate ...
  5. Loan

    The act of giving money, property or other material goods to ...
  6. Interest Rate Risk

    The risk that an investment's value will change due to a change ...
RELATED FAQS
  1. What role did securitization play in the U.S. subprime mortgage crisis?

    The securitization of subprime mortgages into mortgage-backed securities (MBS) and collateralized debt obligations (CDOs) ... Read Full Answer >>
  2. How often is interest compounded?

    Interest can be compounded on any given frequency schedule. Common interest compounding time frames are daily, monthly, semi-annually ... Read Full Answer >>
  3. How does the loan-to-value ratio affect my mortgage payments?

    Several factors affect the mortgage rate you can obtain when you purchase a home. Lenders analyze credit histories and scores ... Read Full Answer >>
  4. What's the difference between a collateralized debt obligation (CDO) and a collateralized ...

    A collateralized mortgage obligation, or CMO, is a type of mortgage-backed security (MBS) issued by an lender that handles ... Read Full Answer >>
  5. What is the difference between a savings & loan company and a bank?

    Savings and loan (S&L) companies provide many of the same services to customers as banks, including deposits, loans, ... Read Full Answer >>
  6. Why does the loan-to-value ratio matter?

    For mortgage lenders and borrowers, the loan-to-value ratio is an important factor in determining the repayment terms of ... Read Full Answer >>
Related Articles
  1. Credit & Loans

    Mortgages: Fixed-Rate Versus Adjustable-Rate

    Both of these have advantages and disadvantages depending on your financial needs and prospects.
  2. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  3. Budgeting

    Mortgages: How Much Can You Afford?

    Answering this means number-crunching as well as factoring in other considerations and expenses.
  4. Credit & Loans

    Is A 30-Year Mortgage Really Best?

    It's the most popular choice, but home buyers with 30-year mortgages may be paying more to finance their home than they need to.
  5. Credit & Loans

    What Are The Pros and Cons Of A 15-Year Mortgage?

    The shorter term, and higher monthly payment, are only part of the picture.
  6. Credit & Loans

    Which Is Better: A 30-Year Or 15-Year Mortgage?

    The difference in monthly payments is what homebuyers think of first when they compare the two. But have you considered these other points?
  7. Credit & Loans

    Is It Worth Buying A Second Home To Rent?

    Mortgage interest rates are low, but consider these dos and don'ts before making the leap into rental property ownership.
  8. Credit & Loans

    How To Combine Two Mortgages Into One?

    If you have a second mortgage as well as a primary, does it make sense to consolidate into a single loan? Here's how to figure it out.
  9. Credit & Loans

    Should I Consolidate My Two Mortgages?

    Consolidating your loans or mortgage may make sense for you, especially when interest rates are low. Here's what you should know.
  10. Credit & Loans

    Top 10 Common Mortgage Scams To Avoid

    How do you know which companies to avoid? Look for these telltale signs.

You May Also Like

Hot Definitions
  1. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  2. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  3. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  4. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  5. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  6. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
Trading Center