Finance
Negative amortization on a mortgage loan occurs when:
AThe principal balance decreases faster than the payment schedule indicates
BMonthly payments are less than the interest accruing, causing the loan balance to increase✓ Correct
CThe interest rate decreases while the principal balance increases
DThe lender charges extra fees that are added to principal
Explanation
Negative amortization occurs when scheduled payments do not cover the full interest accruing, so the unpaid interest is added to the principal balance. The loan balance grows over time rather than decreasing.
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