Negative amortization
The result of a mortgage repayment plan in which the borrower makes payments that amount to less than the interest due.
Negative Amortization
This means that a payment of the stated size is insufficient to repay even the interest on the debt, meaning the total debt actually increases each month instead of falling.
Negative Amortization
An increase in the principal balance of a loan caused by making payments that fail to cover the interest due.
Negative amortization
A loan repayment schedule in which the outstanding principal balance of the loan increases, rather than amortizing, because the scheduled monthly payments do not cover the full amount required to amortize the loan.
A negative amortization or Neg Am loan is a type of loan that is usually used in the purchase of real estate and may be helpful to first time buyers who can't afford huge upfront mortgage payments.
Negative Amortization: A gradual increase in the mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due.
Interest only, negative amortizations, short balloons, extremely long amortizations just to name a few. Typical land contracts are easy to understand and usually only make up 3-5 pages. It is not uncommon for land contracts to go unrecorded.
In the first quarter of 2006, 26% of loans were of the interest-only or negative amortization variety. For a small group of knowledgeable borrowers, loans such as these made sense. But for more than a quarter of the market? No way.
Graduated payment
Repayment terms calling for gradual increases in the payments on a closed-end obligation. A graduated payment loan usually involves negative amortization.
This is known as negative amortization. That means, despite a ceiling, you don't escape the consequences of rising rates, though repayment is postponed, often until the end of the loan's original term.
 See also: Interest, Amortization, Debt, Investment, Period
  
|
RSS
