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:
“About the only difference between the poor and the ritch, is this, the poor suffer mizery, while the ritch hav tu enjoy it.”
—Josh Billings [Henry Wheeler Shaw] (1818–1885)
“The difference between a saint and a hypocrite is that one lies for his religion, the other by it.”
—Minna Antrim (b. 1861)
“Isolation in creative work is an onerous thing. Better to have negative criticism than nothing at all.”
—Anton Pavlovich Chekhov (1860–1904)
“Now listen, buddy, there are a few corny ideas you got to get out of your head if you’re going to fly an airplane. Most things are just the reverse from what people think. The higher you are the safer you are. The Earth down there, that, that’s your enemy because once you hit that, boy, you splatter.”
—Dalton Trumbo (1905–1976)
“The mortgage is still in our name but, increasingly, the house is theirs. One diaper, one vote.”
—Fred G. Gosman (20th century)