Negative Amortization


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Negative Amortization

A loan repayment schedule in which the outstanding principal balance of the loan increases. [1]

To amortize a debt you kill off, reduce or extinguish the liability with each payment. With negative amortization the principal amount due, increases with each payment. This is the the result of a mortgage repayment plan in which the borrower makes monthly payments that are less than the minimum amount of interest due. The difference in interest is then added to the outstanding loan balance, causing the overall loan balance to increase. [2]

From c.1400 negare, deny. [3] amortize 14c, deaden, extinguish, death. Extinguish a debt, is attested from 1864. [4]


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