negative amortization

American  

noun

1. the increase of the principal of a loan by the amount by which periodic loan payments fall short of the interest due, usually as a result of an increase in the interest rate after the loan has begun.

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Example Sentences

While not all banks allow negative amortization, consumers have to adjust their repayments in line with rising interest rates.

From Reuters • Sep. 1, 2023

Back then, negative amortization loans grew in popularity because owners could add to their debt and still sell their properties at a profit or refinance at better terms in a few years.

From Los Angeles Times • Apr. 4, 2022

This increase in the loan balance is known as negative amortization.

From Seattle Times • May 25, 2016

The bill prohibited the use of negative amortization and certain balloon payments.

From US News • May 12, 2016

Qualified mortgage rules, aimed at protecting borrowers, do exclude some of the most notorious mortgages, including no-document loans, negative amortization loans, interest-only loans and balloon-payment loans.

From New York Times • Oct. 23, 2014