negative amortization

negative amortization definition - finance
A repayment schedule in which the monthly payments are insufficient to fully amortize, or pay off, the loan. Interest expense that has been incurred but not paid is added to the principal, which increases the amount of the debt. Typically this occurs with a balloon mortgage where the payments donÂ’t cover the debt and at the end of the term a large payment must be made.

Webster's New World Finance and Investment Dictionary Copyright © 2003 by Wiley Publishing, Inc., Indianapolis, Indiana.
Used by arrangement with John Wiley & Sons, Inc.

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