When choosing a home loan, consider a negative amortization, also known as NegAm, occurs whenever the loan payment for any periodic is less than the interest charged over that period so that the outstanding balance of the loan increases. Negative amortization only occurs in loans in which the periodic payment does not cover the amount of interest due for that loan period. The unpaid accrued interest is then capitalized monthly into the outstanding principal balance. The result of this is that the loan balance (or principal) increases by the amount of the unpaid interest on a monthly basis.

NegAM home loans today are mostly straight Adjustable Rate Mortgages (ARMs), meaning that they are fixed for a certain period and adjust every time that period has elapsed; e.g., one month fixed, adjusting every month.

When choosing a home loan, consider a negative amortization, also known as NegAm, occurs whenever the loan payment for any periodic is less than the interest charged over that period so that the outstanding balance of the loan increases. Negative amortization only occurs in loans in which the periodic payment does not cover the amount of interest due for that loan period. The unpaid accrued interest is then capitalized monthly into the outstanding principal balance. The result of this is that the loan balance (or principal) increases by the amount of the unpaid interest on a monthly basis.

NegAM home loans today are mostly straight Adjustable Rate Mortgages (ARMs), meaning that they are fixed for a certain period and adjust every time that period has elapsed; e.g., one month fixed, adjusting every month.