Deferred Interest

Deferred Interest
The amount of interest that is added to the principal balance of a loan when the contractual terms of that loan allow for a scheduled payment to be made that is less than the interest due. When a loan's principal balance increases because of deferred interest, it is known as negative amortization.

For example, if the periodic interest payment on a loan is $500 and a $400 payment may be made contractually, $100 is added to the principal balance of the loan.

Adjustable-rate mortgages with a deferrable interest feature are typically known as payment option ARMs. Fixed-rate mortgages with a deferrable interest feature are typically known as graduated-payment mortgages. While these mortgages can provide borrowers with the ability to make low monthly payments, they carry the risk that the monthly payments must increase substantially at some point over the term of the mortgage.


Investment dictionary. . 2012.

Игры ⚽ Поможем написать курсовую

Look at other dictionaries:

  • deferred interest — UK US noun [U] FINANCE ► interest on a loan, bond, etc. that does not have to be paid until a future date: »The bonds are sold at a discount to reflect the deferred interest payments …   Financial and business terms

  • deferred interest security — ➔ security …   Financial and business terms

  • Deferred Interest Bond — A debt instrument that pays no interest until a date specified in the future. Zero coupon bonds are a form of deferred interest bond …   Investment dictionary

  • Deferred Interest Mortgage — A mortgage loan that allows the borrower to make minimum payments that are less than the entire amount of interest owed. The remaining interest is added to the amount of loan to be paid off. This is considered to be a negative amortization. The… …   Investment dictionary

  • deferred interest bond — A bond that pays interest at a later date, usually in one lump sum, effectively reinvesting interest earned over the life of the bond. Bloomberg Financial Dictionary See: zero coupon bond. Bloomberg Financial Dictionary …   Financial and business terms

  • deferred interest bond — /dɪˌfɜ:d ɪntrəst bɒnd/ noun same as deferred coupon note …   Dictionary of banking and finance

  • deferred interest bonds — Bonds which carry a provision that interest payments are postponed for a certain period of time …   Black's law dictionary

  • deferred interest bonds — Bonds which carry a provision that interest payments are postponed for a certain period of time …   Black's law dictionary

  • deferred — /dəˈfɜd/ (say duh ferd) adjective 1. postponed or delayed, as property rights which do not vest until some future event has occurred. 2. suspended or held back for a period: deferred interest account of shareholders …  

  • Deferred Acquisition Costs — (DAC) is a term commonly used in the insurance business. It describes the practice of deferring the cost of acquiring a new customer over the duration of the insurance contract. Insurance companies face large upfront costs incurred in issuing new …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”