General Mortgage KnowledgeQuestion 145 of 400
What is negative amortization?
a.The loan balance grows because payments don't cover the interest due
b.The loan is paid off early
c.Interest is waived
d.Principal is paid before interest
Explanation
Negative amortization occurs when the scheduled payment is less than the interest owed, so the unpaid interest is added to the principal and the balance grows. It is the opposite of early payoff or waived interest.
Practice all 400 questions free — no signup required.
Related questions on this topic
- A lender offers to lower the rate for 3 discount points on a $200,000 loan. What is the total cost of buying the rate down?
- An ARM is at 5.00% and the fully indexed rate at adjustment is 9.00%, but the periodic (subsequent) cap is 2%. What is the new rate?
- An ARM is described with caps of 2/2/5. What does the final number (5) represent?
- A fully amortizing loan is one in which:
- A prepayment penalty is a fee charged when a borrower:
- A rate lock primarily protects the borrower against what?
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against NMLS SAFE Mortgage Loan Originator National Test · How we review