minimum payment option mortgage

Definition

An adjustable rate mortgage loan wherein the borrower is offered the option of making a minimum payment for a specific amortization schedule. Payments for an initial period (such as one year) are calculated based on a subsequent fixed amortization rate; however, the interest rate remains constant for the life of the loan. At times the minimum payment is inadequate to pay current interest charges, so the borrower ends up owing more than the original loan amount when the minimum payment period is over.
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minimum payment minimum pension liability