Any situation where the principal of the mortgage increases while payments are being made is known as:
- negative equity
- home equity line of credit
- a positive capitalization rate.
- negative amortization.
The answer is D. A fully amortized loan pays off the principal in a fixed time. A negatively amortized loan, however, does not pay off any principal and only pays interest. This means that the monthly payments are lower for a negatively amortized loan than for a fully amortized loan.