Most loan calculators assume the payment at least covers the interest due — a negative-amortization loan allows a payment below that, deferring the shortfall onto the balance itself.
How it works
Interest due each period is the balance times the periodic rate. If the payment is less than that, the unpaid interest gets added to the balance instead of disappearing — the loan grows even though payments are being made on time.
What this does not include
Many negative-amortization loans have a “recast” trigger — once the balance grows past a certain percentage of the original loan, the lender forces a payment increase to a fully-amortizing level — a trigger this calculator doesn’t model.
How to use this calculator
- Enter the current balance, annual rate, and the monthly payment being made.
Frequently asked questions
Why would anyone choose a negative-amortization loan?
A lower minimum payment than a fully-amortizing loan would require — historically marketed for payment flexibility, though it comes with the risk of a growing balance and an eventual forced payment increase.
Is this the same as an interest-only loan?
No — an interest-only loan’s payment exactly covers interest, keeping the balance flat; a negative-amortization loan’s payment is below even that, so the balance actually grows.
Can this happen on a standard mortgage?
Rarely on new loans today, following post-2008 lending reforms, but some older ARMs and certain graduated-payment mortgages still carry this feature.
