Whats the problem with Negative Amortization?
If the loan ends without sufficient amortization, the remaining mortgage owned could be larger then the original mortgage! The monthly payment is eventually reset to a higher payment amount allowing the loan to amortize over its remaining life. The increase required in the monthly payment to repay the larger loan balance over a shorter period can be substantial. If rates have increased substantially in the interim, refinancing may not be a good option. Real estate prices may not continue to increase, especially if interest rates begin trending higher. Being upside down, or owing more than the home is worth, because of the negative amortization, puts the homeowner in a difficult position when they need to sell the home.
