Negative Amortization Limit
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Definition of 'Negative Amortization Limit'
A provision in certain loan contracts that limits the amount of negative amortization that can take place. A loan negatively amortizes when scheduled payments are made that are less than the interest charge due on the loan at the time. When a payment is made that is less than the interest charge due, deferred interest is created and added to the loan's principal balance, creating negative amortization. A negative amortization limit states that the principal balance of a loan cannot exceed a certain amount, usually designated as a percentage of the original loan balance.
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Investopedia explains 'Negative Amortization Limit'
When a negative amortization limit is reached on a loan, a recasting of the loan's payments is triggered so that a new amortization schedule is established and the loan will be paid off by the end of its term. A negative amortization limit prevents a loan's principal balance from becoming too large, causing excessively large payment increases to pay back the loan by the end of its term.
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Search results for 'Negative Amortization Limit'
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http://www.investopedia.com/articles/mortgages-real-estate/08/payment-option-ARM.asp
... In addition, all POAs have a clause called a negative amortization limit.
The negative amortization limit establishes a percentage ...
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http://www.investopedia.com/articles/pf/07/mortgage-payments.asp
... Note: Payment option ARMs have a "negative amortization limit" that states that
if the outstanding principal balance of the mortgage reaches a certain ...
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http://www.investopedia.com/articles/pf/07/optionarms.asp
... balance reaches 110% of the original balance, there is no limit to the ... the loan will
be adjusted and the threshold for the negative amortization cap should ...
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http://www.investopedia.com/articles/pf/07/mortgage_decision.asp
... However, the destruction of home equity can also severely limit future
financing options. ... This is known as negative amortization. ...
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http://www.investopedia.com/articles/pf/05/031605.asp
... Caps - This refers to the limit on the amount the interest rate ... These loans - known
as negative amortization loans - keep payments low, however these payments ...
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http://financialedge.investopedia.com/financial-edge/0911/Requirements-For-A-Post-Housing-Bust-Mortgage.aspx
... Ratios And Other Requirements There is a limit to how many other outstanding ... Negative
amortization loans and other housing bubble baubles are a non-starter for ...
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http://www.investopedia.com/university/banking-system/banking-system3.asp
... the riskier products, including "pick-a-payment" mortgages and negative amortization
loans, are ... late-payment fees, currency exchange, over-the-limit and other ...
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