Deferred Interest Mortgages

A deferred interest mortgage is 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 negative amortization. The homeowner will let interest accrue.

By making minimum payments that do not cover the loan principal, the balance on the loan is unlikely to get smaller since the interest is calculated on the outstanding principal.

Because low minimum payments do give the borrower payment flexibility, this type of mortgage is often used by investor borrowers as a temporary financing solution.