negative amortization

noun

1. the increase of the principal of a loan by the amount by which periodic loan payments fall short of the interest due, usually as a result of an increase in the interest rate after the loan has begun.

Example Sentences

The rapid pace of interest-rate hikes by the Bank of Canada since last year has pushed some mortgages into negative amortization, which occurs when interest on a loan exceeds the fixed payment on the principle -- resulting in borrowers adding to the principle on their loans.

From Reuters

While not all banks allow negative amortization, consumers have to adjust their repayments in line with rising interest rates.

From Reuters

CIBC's CFO Hratch Panossian told Reuters in an interview that about 8,000 clients had increased their monthly payments and just over 1,000 clients made lump-sum payments, to remove their mortgage from the negative amortization status, as a result of the outreach during the third quarter.

From Reuters

Negative amortization is a situation in which borrowers are adding to the principal, and occurs when interest rates climb as high as the trigger rate.

From Reuters

About 31% of BMO's mortgages are amortized over 30 years and include those with negative amortization and a quarter of TD's mortgages will be repaid after 35 years.

From Reuters