Zero-Coupon Mortgage

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Zero-Coupon Mortgage

A mortgage in which all principal and interest are deferred until maturity. All interest that accrues is rolled into the principal, which is payable in a lump sum. A zero-coupon mortgage may be beneficial for a business property in which cash flow is expected to be low for the foreseeable future, but in which the value of the real estate is expected to increase. The owner in this case could refinance the mortgage at maturity with more valuable real estate securing the loan. See also: Accrual note.
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Cash flow for the nine months of 1993 was assisted to the extent of 55 cents per share by reason of the deferral of interest accrued on the company's then zero coupon mortgage loan.