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amortization.com
Burlington, Ontario
CANADA
905-639-3619
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Negative
Amortization Schedule |
- When mortgage or loan payments are in excess of the interest due,
it is a normal amortization schedule. The balance owing decreases after
every payment.
- When mortgage or loan payments are exactly equal to the interest due,
it is called an interest only schedule. The balance owing remains the
same after each payment.
- When mortgage or loan payments are less than the interest due, it
is called a negative amortization schedule. The balance owing increases
after each payment, because the missing interest is added to the balance.
- When mortgage or loan payments are set to zero in the MORTGAGE2 PRO
amortization schedule the schedule becomes an expanded Present
Value Future Value grid.
A
negative amortization schedule
What if a lender offered you a $150,000 loan (or mortgage) at 6% for 30
years and told you the monthly payments would be $600 per month. This
may sound like a sweet deal but be cautious! If you had an amortization
schedule you notice that the blended monthly payments for 30 years would
have to be $899.33 in order to retire the loan.
(Screenshot 1)
In fact if you only paid $600 per month the loan would never be paid
off. The balance owing would continue to increase with time because it
is a negative amortization schedule. In fact some lenders have been known
to entice new borrowers with a variation of this technique.
Offer the borrowers $600 per month for the first year then switch them
to the regular payments of $899.93
(Screenshot 2)
After 30 years of payments,... surprise surprise ... you still owe a
balance of $20,941.65
(Screenshot 3)
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40 YEAR MORTGAGE INTEREST SAVING TIP
40 YEAR MORTGAGE QUICK ANALYSIS
LATE PAYMENTS
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