Negative Amortization Definition

Negative amortization is where the principal balance on a loan increases initially because the periodic payments being made are not enough to pay off the interest accrued on the loan. The unpaid interest is added to the principal balance of the loan and periodic payments are recalculated at some future date.

Negative amortization: read the definition of Negative amortization and 8,000+ other financial and investing terms in the Financial Glossary.

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Definition of "Negative amortization" Luis Pezzini, Real Estate Agent Pezzini Luxury Homes LA. Increase in the outstanding loan balance arising when the mortgage payment does not fully meet the interest charge on the loan. This occurs under indexed loans or when the indexed rate change does not.

Negative amortization arises when the payment made by the borrower is less than the interest due and the difference is added to the loan balance. Negative Amortization and Related Concepts Ordinarily, the mortgage payment you make to the lender has two parts: interest due the lender for the month, and amortization of principal.

Definition of NEGATIVE AMORTIZATION LIMIT: Specific loan types have this provision. The negative amortization amount is limited. The loan’s principal balance will not increase as the borrower pays

A negatively amortizing loan, sometimes called a negative amortization loan or negative amortized loan, is one with a payment structure that allows for a scheduled payment to be made by the.

Amortization means paying off a loan with regular payments, so that the amount you owe goes down with each payment. negative amortization means that even when you pay, the amount you owe will still go up because you are not paying enough to cover the interest.

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negative amortization Definition A gradual increase in mortgage debt that occurs when the monthly payment is insufficient to cover the interest due, and the balance owed keeps increasing (at least in the first few years).