What is negative
occurs when the monthly payments on a loan are insufficient to pay
the interest accruing on the principal balance. The unpaid interest
is added to the remaining principal due.
Adjustable rate mortgages with payment caps and negative
amortization are usually reamortized at some point so that the
remaining loan balance can be fully paid off during the term of the
loan. This could necessitate a substantial increase in the monthly
payment. Most ARMs have a limit on the amount of negative
amortization allowed, usually 110 to 125 percent of the original
loan amount. If the loan balance exceeds this amount, the borrower
has to start paying off the excess.
Ask your own!
We encourage you to
ask your own questions and we will do everything we can to find the
answer. We will then add your question and answer to the above list
of questions. E-mail questions to
and we will reply shortly.
Copyright 2006-2007 Ruth Technology Corporation