Negative Amortization: With regard to Adjustable Rate Mortgages: Certain types of ARMs have a provision for smaller than the interest only payment being required on the monthly payment. In the event that a less than interest only payment is made the funds not paid are actually added to the loan balance. This addition to the principal balance is Negative Amortization. In essence, the lender is willing to loan you the additional money if you choose not to make the full interest payment. At some point in the mortgage the loan is recast and no more negative amortization can occur.

Borrowers are sometimes afraid of this option because it has not been explained well to them. This option can keep someone who has shifts in their income happy in there mortgage for years. The minimum payment can be made on those months when additional cash flow is needed and larger than interest only payments can be made during the months of more robust cash flow. It can also be very useful to buyers who want to really stretch for the sales price for their planned purchase of a home.

Negative Equity Financing: In auto and other vehicle financing, this is rolling any remaining balance onto a new car loan when the value of the car being turned in is not sufficient to pay off the entire loan.

Net income: The income that remains after paying taxes and other deductions. It is the amount of money that you actually receive in your paycheck.

Net Worth: The assets of an individual, company or government less its’ liabilities.

Non-Prime Rate: Interest rates that are higher than the Prime Rates charged by banks for customer’s with below average credit and credit scores.

Note: The actual legal document signed by the borrower in a real estate transaction. It will state the amount borrowed, the interest rate, the date the first payment is due and the date the last payment is due. It will also state the borrowers’ names. A Note can also serve as the contract or IOU for less formal contracts.