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NEGATIVE AMORTIZATION
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adjustable rate mortgages allow the interest rate to
fluctuate independently of a required minimum payment. If a
borrower makes the minimum payment it may not cover all of
the interest that would normally be due at the current
interest rate. In essence, the borrower is deferring the
interest payment, which is why this is called "deferred
interest." The deferred interest is added to the balance of
the loan and the loan balance grows larger instead of
smaller, which is called negative amortization. |
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BACK TO GLOSSARY |
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Simplicity
Mortgage - 6180
E. State Street, Suite #5 - Rockford, IL.
61108
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