Finance
In South Dakota, 'negative amortization' occurs in a mortgage when:
AThe interest rate decreases below zero
BMonthly payments are insufficient to cover the interest due, causing the unpaid interest to be added to the loan balance✓ Correct
CThe loan pays off faster than scheduled
DThe borrower pays more than required each month
Explanation
Negative amortization occurs when the monthly payment is less than the interest due for that period. The unpaid interest is added to the principal balance, causing the loan balance to grow rather than decrease. This can occur with certain ARM structures or minimum payment options.
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