negative amortization

Definition

When your mortgage payment doesn't cover the interest due, causing your loan balance to actually increase over time. It's like running on a treadmill that's going backwards—you're making payments but falling deeper into debt.

Example Usage

Those low teaser payments seemed great until I realized I was experiencing negative amortization and now owe more than I borrowed.

Origin

Financial term that became infamous during the 2008 housing crisis

Fun Fact

Option ARMs with negative amortization were nicknamed 'suicide loans' by industry insiders before the housing crash.

Source: Mortgage lending and loan structure terminology

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