Expected condition with an increasing principal amount increases following each monthly installment payment. Graduated payment mortgages (GPM) designed to match young executives or professionals with low starting income but high, rapid growth potential have this characteristic. The initial months’ payments are insufficient to cover the interest. The unpaid interest is added to the principal balance every month. Also known as partially amortizing loan.

More On This Topic

Link to This Definition
Did you find this definition of NEGATIVE AMORTIZATION helpful? You can share it by copying the code below and adding it to your blog or web page.
Written and fact checked by The Law Dictionary