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.

BREAKING DOWN '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. Canadian Rollover Mortgage

    A home mortgage with an adjustable rate feature. The Canadian ...
  2. Mortgage Rate

    The rate of interest charged on a mortgage. Mortgage rates are ...
  3. No-Cost Mortgage

    A mortgage refinancing situation in which the lender pays the ...
  4. Second Mortgage

    A type of subordinate mortgage made while an original mortgage ...
  5. Mortgage Accelerator

    A type of mortgage loan program popular in the United Kingdom ...
  6. Mortgage

    A debt instrument, secured by the collateral of specified real ...
Related Articles
  1. Personal Finance

    Shopping for a mortgage in 2016? Use this tool first.

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2016 can all be done online.
  2. Personal Finance

    Shopping for a mortgage in 2016? Use this tool first.

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2016 can all be done online.
  3. Personal Finance

    Understanding the Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  4. Financial Advisor

    Reverse Mortgages: Right for Clients? Not Often

    Reverse mortgages are a legitimate vehicle for folks age 62 and up to tap into the equity in their homes for other uses. Here's what to consider with them.
  5. Insights

    How Interest Rates Affect the Housing Market

    Understand how rate changes can affect home prices and learn how you can keep up.
  6. Personal Finance

    Behind the Scenes of Your Mortgage

    Four major players slice and dice your mortgage in the secondary market.
  7. Retirement

    Additional Streams of Income for Seniors

    Find out how a reverse mortgage can work in your favor during retirement.
  8. Personal Finance

    Score a Cheap Mortgage

    Hidden costs can create what looks like a good deal. Find out how to find the best mortgage possible.
RELATED FAQS
  1. What are the pros and cons of a simple-interest mortgage?

    Learn the difference between a simple interest mortgage and a standard mortgage, along with their relative advantages and ... Read Answer >>
  2. What are the different types of subprime mortgages?

    Clarify your understanding of subprime mortgages. Learn about the different types, how they work and when they might be beneficial. Read Answer >>
  3. If my mortgage lender goes bankrupt, do I still have to pay my mortgage?

    Yes, if your mortgage lender goes bankrupt you do still need to pay your mortgage obligation. Sorry to disappoint, but there ... Read Answer >>
  4. What is an assumable mortgage?

    The purchase of a home is a very expensive undertaking and usually requires some form of financing to make the purchase possible. ... Read Answer >>
  5. What’s the difference between a mortgage lender and a mortgage servicer?

    Buying a home is an exciting and confusing process. Once the loan is secured, it's important to know who gets the payment: ... Read Answer >>
Trading Center