DEFINITION of 'ZeroCoupon Mortgage'
A form of commercial financing in which regular interest and principal payments are deferred until maturity, rather than paid over the course of the loan. While the coupon rate on such a mortgage is technically zero because there are no regular coupon or interest payments, interest accrues and is rolled into the principal amount at maturity.
BREAKING DOWN 'ZeroCoupon Mortgage'
Zerocoupon mortgages are especially useful for commercial projects where cash flows to service debt may not be available until the project nears completion. As total interest plus principal repayment is only received by the lender when the loan matures, the credit risk is significantly higher than with a conventional loan. As such, lenders may only offer this form of financing to established commercial borrowers with pristine credit records.

ZeroCoupon Bond
A debt security that doesn't pay interest (a coupon) but is traded ... 
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A type of loan in which payments on the principal are not made, ... 
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Deferred Interest Mortgage
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Deferred Interest
The amount of interest that is added to the principal balance ... 
Coupon Stripping
The separation of a bond's periodic interest payments from its ...

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Why does the majority of my mortgage payment start out as interest and gradually ...
When you make a mortgage payment, the amount paid is a combination of an interest charge and principal repayment. Over the ... Read Answer >> 
How do I calculate yield to maturity of a zero coupon bond?
Find out how to calculate the yield to maturity for a zero coupon bond, and see why this calculation is more simple than ... Read Answer >> 
When capitalizing interest, will interest accrue while you are in a deferment?
Learn what capitalized interest is. Understand why interest accrues while a person is in a deferment, based on capitalized ... Read Answer >> 
Why is more interest paid over the life of a loan when it is capitalized?
Learn what it means to capitalize interest on a loan. Understand why more interest is paid over the life of a loan when it ... Read Answer >> 
What is the difference between yield to maturity and the coupon rate?
Read about some of the basic differences between a debt security's coupon rate and its yield to maturity, and learn which ... Read Answer >> 
What is the difference between a zerocoupon bond and a regular bond?
The difference between a zerocoupon bond and a regular bond is that a zerocoupon bond does not pay coupons, or interest ... Read Answer >>