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In finance, negative amortization, also known as NegAm, deferred interest or graduated payment mortgage, occurs whenever the loan payment for any period is less than the interest charged over that period so that the outstanding balance of the loan increases. As an amortization method the shorted amount (difference between interest and repayment) is then added to the total amount owed to the lender. Such a practice would have to be agreed upon before shorting the payment so as to avoid default on payment. This method is generally used in an introductory period before loan payments exceed interest and the loan becomes self-amortizing. The term is most often used for mortgage loans; corporate loans which have negative amortization are called PIK loans.
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|English Spanish dictionary by Jaime Aguirre||Download this dictionary|
amortización negativa - cuando la opción de pago mínimo es tan baja que ni siquiera cubre todos los intereses a pagar - lo que no se paga se le agrega al principal
|Campbell R. Harvey's Hypertextual Finance Dictionary||Download this dictionary|
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. The unpaid interest is added to the outstanding principal, to be repaid later.
|BASSAM Trade, Real Estate, Mortgage, Fund,Invest, Insurance,& Tax,Terms/abbreviations/defin.||Download this dictionary|
Amortization means that monthly payments are large enough to pay the interest and reduce the principal of your mortgage. Negative amortization occurs when the monthly payments do not cover all of the interest cost. The interest cost that isn't covered is added to the unpaid principal balance. This means that even after making many payments, you could owe more than you did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments not high enough to cover the interest due.
|Dictionary of Real Estate Terms||Download this dictionary|
Occurs when your monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid balance of the loan. The danger of negative amortization is that the home buyer ends up owing more than the original amount of the loan.
| NEGATIVE AMORTIZATION in English | NEGATIVE AMORTIZATION in Spanish
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