Dec 07 2008
Negative Amortization
Because of the lower initial monthly payments, there may be negative amortization during the first year(s) of the loan. Negative amortization occurs when the scheduled payment does not cover the entire interest rate charge. The unpaid interest is added to the principal balance, creating negative amortization.
GPM loans are rarely available today, because their benefits and advantages do not really offset their costs and disadvantages. Again, most home buyers will discover that they are better off with a Temporary Buy-Down program or a standard 30-year fixed-rate loan, rather than the GPM.
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