Question:

What is accrued and unpaid interest?

Answer:

If you are inquiring about accrued and unpaid interest, consider doing the same about borrower’s payment shock. This is what happens to one that has signed for a negative amortization ARM with ultra low monthly payments without considering what is accrued and unpaid interest, as well as what happens with it.

When accrued and unpaid interest has been adding to the principal for some time without the buyer knowing about it, sooner or later there comes the payment shock.

It is very tempting to lock on a new 2% home loan in order to reduce monthly payments, even if there are some closing fees. However, not so much so if you are making the minimum payments and have some hundreds of dollars deferred interest adding to the principal each month. Walking off such an ARM may also be off question as it is highly likely that the agreement have large prepayment penalties as of thousands.

However, there are people that are considering these risky ARMS an investment tool. Still, even though you might be perfectly aware of what accrued and unpaid interest is and how to play with it, those ARMs are quite a risk.

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