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. Principal

    1. The amount borrowed or the amount still owed on a loan, separate ...
  4. Refinance

    1. When a business or person revises a payment schedule for repaying ...
  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 is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  2. In what instances does a business use closed end credit?

    The most common types of closed-end credit used by both businesses and individuals are mortgages and auto loans. Businesses ... Read Full Answer >>
  3. What are the long-term effects of delinquent accounts?

    Delinquency occurs when borrowers fail to make payments on their loans. All loan borrowers should do their best to avoid ... Read Full Answer >>
  4. How was the American Dream impacted by the housing market collapse in 2008?

    The American Dream was seriously damaged by the housing market collapse in 2008. In many ways, the American Dream is a self-fulfilling ... Read Full Answer >>
  5. How much risk is associated with subprime mortgages?

    A large amount of risk is associated with subprime mortgages. Since the mortgages are specifically for people who do not ... Read Full Answer >>
  6. What are the financial consequences of filing for bankruptcy?

    The financial consequences of filing for bankruptcy are substantial and can be long-lasting. They include impacts on your ... 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

    Smart Ways to Use a Mortgage Calculator

    When you're buying a home, it's essential to do due diligence about the true costs. Mortgage calculators will show you if you can afford the purchase.
  5. Home & Auto

    How to Live Mortgage Free in a Tiny House

    Downsizing to a much smaller home – no more than 500 square feet – on your own or rented land can be a smart way to offload mortgage debt.
  6. Credit & Loans

    Calculating Interest Expense

    Interest expense is the cost of borrowing money.
  7. Economics

    What is a Subprime Mortgage?

    Subprime mortgages are offered to borrowers with low credit ratings, usually 600 or below.
  8. Home & Auto

    Strategies To Buy The Perfect Vacation Home

    Ask yourself these six questions to make the right decision about a vacation property.
  9. Economics

    How Does a Lien Work?

    A lien gives a creditor the legal right to seize and sell property, then use the proceeds to pay off a borrower’s debt.
  10. Retirement

    Is Your Mortgage Robbing Your Retirement?

    If you picked the mortgage with the lowest possible monthly payment, you may be blowing what could be your retirement money on mortgage interest.

You May Also Like

Hot Definitions
  1. Radner Equilibrium

    A theory suggesting that if economic decision makers have unlimited computational capacity for choice among strategies, then ...
  2. Inbound Cash Flow

    Any currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow ...
  3. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  4. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  5. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  6. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!