Negative amortization definition

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Eventually, your monthly payment will struggles to make ends meet to refinance at a favorable.

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In finance, negative amortization occurs whenever the loan payment for any period is less than the interest charged over that period so that the outstanding balance of the loan increases. As an amortization method the shorted amount is then added. Negative amortization is when a borrower pays less than the amount that will result in paying down the principal, so the loan amount actually. Negative amortization is when your payments fail to cover your interest and principal amounts. Learn about how to get your mortgage back on track.

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Please help improve this article by adding citations to reliable sources. If you paid less than the interest due on your mortgage payment, then that is negative amortization. In a very hot real estate market a buyer may use a negative-amortizing mortgage to purchase a property with the plan to sell the property at a higher price before the end of the "negam" period. The result of this is that the loan balance or principal increases by the amount of the unpaid interest on a monthly basis. The start rate on a hybrid payment option ARM is higher, yet still extremely competitive payment wise.