Home » What is a Negative Amortization Loan

What is a Negative Amortization Loan

A type of loan popular during the 2001 – 2008 credit boom that allows borrowers to make monthly payments less than the monthly interest owed, so the total amount owed increases over time. These loans assume that home prices will go up to offset the rising cost of the loan. But if home values don’t increase enough, the borrower ends up owing more on his mortgage than his home is worth.