Negative amortization - When mortgage payments do not cover the full amount of interest due, and the unpaid interest is added to the principal balance of the loan. Under standard amortization, the principal balance decreases with each payment.Typicaly the lender will have a cut off on how much can be added to the principal. Usally a lender will not allow you to go over a 110 % of what the house is worth.
One of the most common loans that accrues negative amortization is the option arm.
Morgage loans with Negative Amortization feature is often used by homebuyers who do not intend to keep the loan for long and during an era when home prices are in an upward trend. These homeowners' priority is to have the option to make minimal monthly payments. They often either refinance the mortgages or sell the properties for profit when the homes appreciate in value.
There are different types of 100% loans. You can
either get 1 loan for 100% or an "80/20" loan. Speak to your mortgage
professional to see which program is best for you!
