Negative Amortization Explained
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Negative amortization occurs when a payment does not cover the interest due; the unpaid interest is added to principal, so the balance grows despite payment.
The arithmetic
If opening principal is $200,000 and monthly interest is $1,000 but the allowed payment is $800, the $200 shortfall is added to the balance. The new principal becomes $200,200 before other charges.
Run the numbers in the Amortization Calculator with the same assumptions used in this guide.
Why it compounds risk
Future interest can be calculated on a larger principal, so the debt can grow and later required payments may rise substantially. CFPB warns that a borrower can end up owing more than the home's value.
How to identify it
Review disclosures and statements for payment options, interest-only periods, balance changes, recast dates, and balloon features. Ask whether any offered payment can be less than accrued interest.
Why the standard tool does not apply
CalculatorGeek's standard amortization schedule assumes a payment sufficient to cover periodic interest and reduce principal. It must reject or clearly label payment-option scenarios it does not model.
Decision boundary
Use the loan's disclosures and a qualified adviser for a specific product. Do not infer safety from a temporarily low payment.
Next, keep a projected balance separate from a lender payoff quote.
Frequently asked questions
Is interest-only the same as negative amortization?
Not always. Paying all accrued interest can keep principal unchanged; paying less makes principal grow.
Can a fixed-rate loan negatively amortize?
Product terms and payment behavior control; review the contract.
Will a normal amortization calculator show it?
Not unless negative amortization is explicitly modeled.
What should I compare?
Payment options, maximum rate/payment, recast triggers, balloon amounts, fees, and total cost.
Sources
- CFPB amortization explanation: https://www.consumerfinance.gov/ask-cfpb/what-is-amortization-and-how-could-it-affect-my-auto-loan-en-771/
- CFPB interest rate vs APR: https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-mortgage-interest-rate-and-an-apr-en-135/
- CFPB mortgage servicer rules: https://www.consumerfinance.gov/consumer-tools/mortgages/your-mortgage-servicer-must-comply-with-federal-rules/
- CFPB negative amortization: https://www.consumerfinance.gov/ask-cfpb/what-is-negative-amortization-en-103/
Source research refreshed September 21, 2026. The calculation, source, and content checks were refreshed on September 21, 2026. This page provides educational estimates, not lending, legal, tax, or financial advice.
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