Negative Amortizing Mortgage

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Negative Amortizing Mortgage

A mortgage loan in which the principal amount increases if a payment does not cover the full interest due. For example, if the interest due for a given month is $300 and the borrower pays $200, then $100 will be added to the principal. A negative amortizing mortgage allows more people to be eligible to borrow with lower monthly payments, but negative amortization will inevitably increase the payments when it comes time to repay the principal. See also: Payment option ARM.