Negative Amortization

A loan feature in which the borrower pays back less than the full amount of interest owed each month. The shorted amount is then added to the loan's balance.

A borrowing method that is intended to add flexibility to a loan and help borrowers stretch their budgets to buy houses they could not afford with a traditional, 30-year-fixed-rate mortgage. It keeps payments low in the early years of the loan, on the theory that the borrower will have more income later, the house will have appreciated, and the owner can refinance.

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A mortgage feature that's especially common in parts of the country with relatively high housing costs, such as California and the Washington region.

A situation that often develops when an adjustable-rate loan's rate changes more often than its required monthly payment.

A type of mortgage that's often advertised with very low "teaser" rates, further exacerbating the likelihood of payment shock when the interest rate adjusts and payments on the now-bigger loan balance jump considerably.

A provision that can leave homeowners upside down on their loans, even after owning a property for many years. This puts the homeowners at a higher risk of default and foreclosure, as they can't even refinance their way out of a temporary financial jam.