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Negative amortization |
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Negative amortizationA loan repayment schedule in which the outstanding principal balance of the loan increases, rather than amortizing, because the scheduled monthly payments do not cover the full amount required to amortize the loan. The unpaid interest is added to the outstanding principal, to be repaid later.Negative amortization Similar MatchesPlanned amortization class (PAC)Planned amortization class (PAC)(1) The class of CMO that has the most stable cash flows and the lowest prepayment risk of any class of CMO Because of a stable cash flow, it is considered the least risky CMO (2) A CMO bond class that stipulates cash flow contributions to a sinking fund. A PAC directs principal payments to the sinking fund on a priority basis in accordance with a predetermined payment schedule, with prior claim to the cash flows before other CMO classes. Similarly, cash flows received by the trust in excess of the sinking fund requirement are also allocated to other bond classes. The prepayment experience of the PAC is therefore very stable over a wide range of prepayment experience. N Negative AmortizationN Negative AmortizationA condition created when a loan payment is less than interest alone. Even though payments are made on time, the amount owing increases. AmortizationAmortizationPayment of a debt in equal installments of principal and interest, rather than interest only payments. Amortization scheduleAmortization scheduleA schedule of how mortgage debt is changed over time. AmortizationAmortizationThe deduction of an expense in installments over a period of time, rather than all at once. Further SuggestionsAmortizationLoan amortization schedule Earnings before interest, taxes, depreciation, and amortization (EBITDA) Amortization tables Amortization factor |
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