| Month | Payment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | $800.00 | $1,041.67 | -$241.67 | $200,241.67 |
| 2 | $800.00 | $1,043.92 | -$243.92 | $200,485.59 |
| 3 | $800.00 | $1,046.17 | -$246.17 | $200,731.76 |
| 4 | $800.00 | $1,048.50 | -$248.50 | $200,980.26 |
| 5 | $800.00 | $1,050.85 | -$250.85 | $201,231.11 |
Sample assumes $200,000 balance, 6.25% APR, and $800 payments. Interest not covered is added to the balance.
- Monthly rate: r = APR / 12
- Monthly interest: Interest = Balance × r
- Principal change: Principal = Payment − Interest
- New balance: NewBalance = Balance − Principal
- Deferred interest: Deferred = max(0, Interest − Payment)
- Recast payment (amortizing): PMT = (r × B) / (1 − (1 + r)−n)
When Payment is less than Interest, Principal is negative and the balance increases.
- Enter the loan amount, APR, and term.
- Pick a payment strategy that matches your loan design.
- Set a negative-am cap or a forced recast month.
- Optionally add rate steps to simulate rising rates.
- Press Calculate and review warnings and the schedule.
- Export CSV or PDF to compare scenarios side by side.
Educational use only. Real loans can include fees, escrow, and payment caps.
Payment Shortfall and Deferred Interest
Negative amortization occurs when the monthly payment is below interest due. The model uses Interest = Balance × (APR/12) and Deferred = max(0, Interest − Payment). A $200,000 balance at 6.25% APR produces about $1,041.67 interest in month one. Paying $800 defers $241.67 and adds it to the balance. Interest grows on the new balance, so the gap can widen quickly over time without a recast or higher payment.
Balance Cap and Recast Behavior
Loans often limit balance growth with a cap, such as 110% of original principal. With a $200,000 start, a 110% cap implies a $220,000 trigger level. After a trigger, the payment can be recalculated to amortize the higher balance: PMT = (r × B) / (1 − (1 + r)^−n). The schedule then targets full payoff within remaining months.
Teaser Payments Versus Fully Amortizing Payment
Teaser structures can reduce early payments, but can raise long-run cost. In teaser mode, the intro payment amortizes the original balance at the teaser rate over the full term. If the note rate exceeds the teaser rate, the payment may not cover full interest, creating deferred interest. Post-intro rules show how quickly balance growth compounds.
Rate-Step Scenarios and Lifetime Caps
The optional rate-step feature increases APR by a fixed number of percentage points each year, up to a lifetime cap. Higher APR raises monthly interest and can convert a break-even payment into a negative-am month. Test step sizes like 0.25 to 1.00 points. Track maximum balance, deferred interest, and the month the cap or recast activates.
Comparing Scenarios with Exports and Metrics
Compare Total Paid, Total Interest, Deferred Interest, and Maximum Balance across scenarios. Even a small extra payment can reduce negative-am months by shrinking interest shortfalls. Export CSV for spreadsheet work and PDF for sharing. Run three cases: minimum payment, minimum plus extra, and an earlier recast month than the cap, to see tradeoffs clearly.
What does negative amortization mean?
It means your payment is less than the interest due for the month, so unpaid interest is added to the balance and the loan grows instead of shrinking.
Why did my balance increase even after paying?
If the payment does not cover monthly interest, principal becomes negative. The calculator adds the shortfall to the balance, increasing next month’s interest.
How does the cap trigger work?
When the balance reaches the cap level (percent of original principal or a fixed amount), the schedule flags a trigger and switches to an amortizing payment from the next month.
What is a recast and how is the new payment set?
A recast recalculates payment to pay off the current balance over remaining months. The model uses the standard PMT formula with the current APR and remaining term.
How do rate steps affect results?
Rate steps increase APR each year up to a lifetime cap. Higher APR raises interest, which can create more negative-am months unless payments rise enough to cover it.
Do exports include my inputs?
CSV exports the month-by-month schedule from your last calculation. The PDF captures the visible schedule table. For auditability, consider saving screenshots of your inputs too.