Your uncle starts droning on about a steak he ate in 1984. Trying to be nice, you make an attempt to listen, but you undergo something close to an out-of-body experience. Your mind totally detaches, and suddenly you can't hear him at all...just an incessant buzzing in your ears as your spirit slowing drifts away. Interest shortfall.
There's also a finance-related connotation for the term "interest shortfall," though.
You have an adjustable-rate mortgage. That structure means that the amount you owe can change based on fluctuations in overall interest rates. Your mortgage contract has a limit on how much your monthly payment can change when interest rates re-adjust. However, the rates themselves can alter more than the monthly payment.
At some point during your loan, interest rates skyrocket. The monthly payment, protected by the caps, only moves a relatively small amount. But the rates themselves have moved much more dramatically. As a result, there's a certain amount of interest not covered by your monthly mortgage bill. Essentially, your payment is too low to pay back the loan completely, at least as it now stands.
This situation constitutes an interest shortfall. Your payments are too small to cover all the interest you owe. In other words...there's a shortfall.
The additional interest payments are added to the principal of the loan, essentially extending the period of time it will take you to pay off the mortgage. The situation caused by the interest shortfall is known as negative amortization.
Related or Semi-related Video
Finance: What is Accrued Interest?42 Views
Finance allah shmoop What is a crude interest A crude
interest would be an investment holding in oil Black crude
texas t remember jed boy Howdy coming Listen to a
story about a man named about that Alright all good
but that's not what a crude interest is at all
while street never sleeps right So even though a given
bond might pay forty bucks twice a year what happens
if you buy the bond midway through a semester period
Like let's say this particular bond has a coupon paying
eight percent a year So on a thousand dollars a
principle this bond pays eighty bucks a year in the
form of interest or forty bucks twice a year paid
on june thirtieth in december thirty first Well think about
the number's here on a monthly basis each month that
bond creeps closer to its next interest payment and over
the course of a year there are twelve creeps Different
creeps each month that goes by the bonds creep further
into the eighty dollars a year or eighty dollars per
twelve months or eight twelves of a bond payment each
month Well at eighty bucks a year despond pay six
Dollars and sixty seven cents a month in interest Yeah
we got the math there Yeah So let's say you
sell it halfway into its period Presumably the market price
would reflect the accrued interest on the bond or three
months worth of interest or three times that six sixty
seven figure or yes twenty bucks And that makes sense
right You've held that bond a quarter a quarter of
a year a quarter of a year's interest of eighty
boxes one fourth of eighty or yep twenty So yeah
the math works What do you know So the price
of the bond would creep upward to reflect that accrued
interest That is if you sold it on the exact
end of the quarter that thousand dollar bond which was
conveniently selling it exactly part The end of the last
payment Well that bond would likely sell in the market
place for about a thousand twenty dollars The buyer would
get a check for forty bucks just ninety days later
from the a company that issued the bond And well
they can take that forty dollars and reinvested in crude
oil How about that Now you've made old jed very
proud So come and listen to a story about a
man named shmoop Poor rests A writer barely kept his
family fed and one day there was a site of 00:02:18.46 --> [endTime] web and well stuff happens
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