Similar to
Adjustable Rate Mortgages (ARM), Negatively
Amortizing Loans offers payments caps instead of interest rate caps and limits
the amount that the monthly payment can increase.
However, this is a dangerous loan to be in because the
loan could become ‘negatively amortized’: the interest rates rise higher to a
point where the monthly payment does not cover the interest being charged. If
this occurs, the extra interest charges are added to your principle, which
could result in you owning more than you borrowed.
If
you are in a negative amortizing situation, you can usually pay extra to cover
the full amortization amount so that your loan balance does not increase.
Be sure to read our other mortgage advice articles:
Fixed Rate Loans
Adjustable Rate Loans
VA Loans
FHA Loans
Balloon Loans
Convertible Mortgage Loans
Graduated Payment Mortgages
Buy-Down Mortgage
Jumbo Loans
2nd Mortgage Loans
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