Leah Zlatkin interviewed by BNN Bloomberg: “What happens if you only pay interest on your home?”

https://www.bnnbloomberg.ca/what-happens-if-you-only-pay-interest-on-your-home-1.1936107

Leah Zlatkin, a mortgage broker and expert with LowestRates.ca, said in an interview with BNNBloomberg.ca that the cost of variable rate mortgages has been going up in accordance with interest rate hikes from the Bank of Canada.

There are two types of variable mortgage products, she said, one where your payment changes in line with the central bank’s overnight rate and another with static payments, where a person pays the exact same amount each week.

With static payment variable rate products, payments do not increase with interest rates, instead the proportion of interest versus principal in their loan will change, Zlatkin said.

“In order to allow you to pay the same amount of payment and to have the interest rate going up inside of that payment amount and the principal amount being reduced, your amortization – or the length of time within which you need to pay that mortgage back – gets elongated,” she said.

“It extends out in order to accommodate for the fact that you’re paying down less principal.”