Mortgage Dictionary

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Negative Amortization

Negative amortization occurs when monthly mortgage payments are too small to pay all the interest due on the loan. As a result, the loan balance increases, and the borrower ends up owing more than the original amount of the loan.

Some mortgages, such as the graduated payment mortgage, result in negative amortization for part of the loan term.

See also:   Adjustable-Rate Mortgage (ARM)