What is negative amortization and how does it occur?
An "amortization schedule," in general, is a record of loan or mortgage payments. This record includes the payment number, date, amount, breakdown of principal and interest, and the remaining balance owed after the payment. An amortizing loan’s periodic repayments contain an amount designated for the reduction of the principal, so that the balance will eventually be reduced to zero. The time necessary for the balance to reach zero is calculated in an amortization schedule.
What is Fixed Rate Amortizing Loans?
The monthly payments for interest and principal remain consistent and never change in fixed rates. The monthly payments will typically be stable even if property taxes and homeowners insurance increase. In a fixed rate-amortizing loan, the interest rate remains fixed for the life of the loan. The monthly payments remain level for the life of the loan and are prearranged to pay off the loan at the end of the loan term. An example of a fixed rate loan is a 30-year mortgage that takes 22.5 years of level payments to pay half of the original loan amount.
