Veronica has had a variable-rate mortgage for several years. Unfortunately, the monthly mortgage payments have not covered her interest owed. As a result, her home equity is decreasing because of

Question

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Negative amortization occurs when the monthly payments on a mortgage loan are not enough to cover the interest owed. As a result, the interest owed is added to the loan balance, which causes the home equity to decrease over time. This often happens with variable-rate mortgages, also known as adjustable-rate mortgages (ARMs), where the interest rate can change over time. FHA, VA, and buy-down loans do not necessarily involve negative amortization.

Veronica Has Had a Variable-Rate Mortgage for Several Years