Difference Between Negative Amortization and A Reverse Mortgage
A negative amortization mortgage should not be confused with a reverse mortgage. A negative amortization mortgage is a mortgage where the principal increases throughout the early stage of the mortgage. This early stage is known as the negative amortization or NegAm period. During this time period the borrower is, in effect, making partial payments toward his mortgage. The remainder of his payment, which he is not paying, is added on to the amount owed on the mortgage. Naturally, when this period ends, he must start to pay this additional amount off, along with his original principal.
A reverse mortgage happens when a homeowner, usually a retired person, sells some or all of his equity in his home and retains the right to live there. No payments are due until the homeowner sells the house, moves out of the house, or dies. However, all the interest charged on the loan is applied back to the principal, since no interest payments are made during the life of the loan.
Read more about this topic: Negative Amortization
Famous quotes containing the words difference between, difference, negative, reverse and/or mortgage:
“That was always the difference between Muhammad Ali and the rest of us. He came, he saw, and if he didn’t entirely conquer—he came as close as anybody we are likely to see in the lifetime of this doomed generation.”
—Hunter S. Thompson (b. 1939)
“Today’s difference between Russia and the United States is that in Russia everybody takes everybody else for a spy, and in the United States everybody takes everybody else for a criminal.”
—Friedrich Dürrenmatt (1921–1990)
“There is no reason why parents who work hard at a job to support a family, who nurture children during the hours at home, and who have searched for and selected the best [daycare] arrangement possible for their children need to feel anxious and guilty. It almost seems as if our culture wants parents to experience these negative feelings.”
—Gwen Morgan (20th century)
“We came home from the ridotto so late, or rather so early, that it was not possible for me to write. Indeed we did not go ... till past eleven o’clock: but nobody does. A terrible reverse of the order of nature! We sleep with the sun, and wake with the moon.”
—Frances Burney (1752–1840)
“The mortgage is still in our name but, increasingly, the house is theirs. One diaper, one vote.”
—Fred G. Gosman (20th century)