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• Occurs when the monthly payments in an adjustable-rate mortgage loan do not cover all the interest owed. The interest that is not paid in the monthly payment is added to the loan 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 that are not high enough to cover the interest due or when the minimum payments are set at an amount lower than the amount you owe in interest.

  The Federal Reserve Board - Cite This Source - This Definition
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  Cite Definition for Negative amortization

  American Psychological Association (APA)

  Negative amortization. (n.d.). A Consumer's Guide to Mortgage Refinancings. Retrieved November 27, 2022, from website: http://www.expertglossary.com/definition/negative-amortization.

  Chicago Manual of Style (CMS)

  Negative amortization. www.federalreserve.gov. A Consumer's Guide to Mortgage Refinancings. The Federal Reserve Board. http://www.expertglossary.com/definition/negative-amortization (accessed: November 27, 2022).

  Modern Language Association (MLA)

  "Negative amortization." A Consumer's Guide to Mortgage Refinancings. The Federal Reserve Board. 27 November. 2022 http://www.expertglossary.com/definition/negative-amortization.

• Browse Related Terms: Adjustable-Rate Mortgage (ARM), amortization, balloon mortgage, Convertible ARM, Debarment, Fixed-Rate Mortgage (FRM), Interest-only mortgage, Lock-In, Lock-in agreement, Mortgage life insurance, Negative amortization, Payment Cap, Right of rescission, Self-Amortizing Loans, Swap, term, Weighted Average Life (WAL)

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