Negative Amortization

A situation in which the loan principal is actually increasing, instead of decreasing. This usually happens when the payments are less than the amount of the interest due, so that the overdue interest becomes part of the principal balance. Some ARM loans may incur negative amortization, because as caps are factored in, the capped payment is insufficient to cover the interest due. Thus, the unpaid or deferred interest becomes additional principal. For more information, see the "ARM Loans" article in the "Loan Programs" section.

Was this article helpful?

0 0
Best Investment Tips and Ideas

Best Investment Tips and Ideas

The dynamics of investing can be very emotional and stressful if not properly managed. When you are aware of what is all involved you give yourself the power to avoid those situations or at least manage them effectively. That will make your investments more exciting, rewarding, and enjoyable. Those positive factors will only lead to greater success in all that achieve with investments and life.

Get My Free Ebook


Post a comment