What is a 'Deferred Interest'
A deferred interest is the amount of interest that is added to the principal balance of a loan when the contractual terms of that loan allow for a scheduled payment to be made that is less than the interest due. When a loan's principal balance increases because of deferred interest, it is known as negative amortization.
BREAKING DOWN 'Deferred Interest'
For example, if the periodic interest payment on a loan is $500 and a $400 payment may be made contractually, $100 is added to the principal balance of the loan.
Adjustablerate mortgages with a deferrable interest feature are typically known as payment option ARMs. Fixedrate mortgages with a deferrable interest feature are typically known as graduatedpayment mortgages. While these mortgages can provide borrowers with the ability to make low monthly payments, they carry the risk that the monthly payments must increase substantially at some point over the term of the mortgage.

Negative Amortization
An increase in the principal balance of a loan caused by making ... 
NonAmortizing Loan
A type of loan in which payments on the principal are not made, ... 
Deferred Interest Mortgage
A mortgage loan that allows the borrower to make minimum payments ... 
Amortized Loan
A loan with scheduled periodic payments of both principal and ... 
Simple Interest
A quick method of calculating the interest charge on a loan. ... 
Interest Due
The portion of a current mortgage payment that is comprised of ...

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