Negative Amortization - What is it?
August 3rd, 2007 by John Thomas
Negative Amortization
Amortization is the repayment of a loan by making systematic payments over a set time period which are applied to the combined balance of the principal and interest for that loan amount. Therefore, negative amortization occurs when the payment is less than the required interest that has accrued on the loan for that month.
Summary:
Few lenders offer negative amortization loans today. Those that do have annual payment caps and lifetime interest rate caps for steady control on required payments over time.
Ideally Suited for:
Ideally suited for a client living in an appreciating real estate market who needs a consistent, predictable payment for cash flow purposes, yet has the potential of income rising in the future.
I am a Delaware native who has been actively involved in the Mortgage and Finanace industries for over 10 years