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Amortization

Filed Under mortgage 

Repayment of a mortgage loan through monthly installments of principal and interest; the monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period (for example, 15 or 30 years)

Procedure of reducing a loan in equal sized installments, with principal and interest payments, versus interest-only payments.

Borrowers can make extra mortgage payments on their home loan to decrease the amortization term.

Generally, payments made during the first five to seven years of a mortgage go largely towards interest. As the loan matures, a higher and higher proportion of each payment goes towards the principal loan balance. These payment schedules, or amortization tables, can easily be calculated by yourself using just about any spreadsheet program out on the market.

Amortization can also be considered negative amortization if the monthly installments do not cover the total amount of interest payable during the month.

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