Which one of these situations creates negative amortization?
A)Increasing the amount of the monthly mortgage payment
B)Paying less than the monthly interest on a mortgage
C)Decreasing the amount paid into an escrow account
D)Lowering the mortgage interest rate
E)Decreasing the amount of the down payment

Question

Quizplus · Accepted Answer

Negative amortization occurs when the monthly payment on a loan is not enough to cover the monthly interest charges, causing the unpaid interest to be added to the loan balance. Choosing option B (paying less than the monthly interest on a mortgage) would lead to negative amortization.

Which One of These Situations Creates Negative Amortization