# Mortgage Amortization

## Definition of "Mortgage Amortization"

Written by

Century 21 Professional Realty

The term mortgage amortization is the steady switch occurring to each mortgage payment between how much interest is covered and how much principal each month. Simply put, mortgage amortization is the plan for repaying a mortgage. Because the debt diminishes with each payment, the interest diminishes, and because the interest decreases monthly, the principal coverage increases with each payment.

### The Mortgage Amortization Definition

Amortization is the way through which mortgages are repaid. This feature can be applied to mortgages with an equal monthly payment and a fixed timeline. Mortgages, as well as other loans, can be amortized.

Let’s see this through a more practical explanation. The trademark of an amortized mortgage or amortized loan is the shift from paying mostly interest every month to mainly paying principal every month. The math goes like this: for a \$100,000 mortgage with a 4.5% interest rate, amortized over a span of 30 years, the fixed monthly payment totals at \$507. In this value, during the first month, we will see that \$375 goes to cover the interest, and the remaining \$132 covers the principle. Towards the mortgage’s mid-term, there is a switch with \$249 going to the interest and \$257 to the principle. The last mortgage payment will be split into \$2 for the interest and \$505 for the principal.

### How does Mortgage Amortization work?

Mortgage amortization is a repayment plan that uses an amortization table or amortization schedule as a way to visualize the concept. An amortization schedule is a grid or table showing how payments are split between the interest and the principal, and the balance that remains after each payment. Below you can see how mortgage amortization works in time.

With mortgage amortization, after four payments, the balance reaches \$99,470, and in 3 years, the balance is \$94,341. An amortized mortgage is a loan where the balance decreases gradually at first and more abruptly in the final years. Similarly, equity is built slowly at first but more rapidly in the last years.

Need help as a:

I'm interested to:

Sell
Rent

I work in:

Residential
Commercial
Rental
##### Reach out to the local professionals for help

Here's what you'll get:

1. Full zipcodes coverage for the city of your choice for 3 months

2. The ability to reach a wider audience

3. No annual contract and no hidden fees

4. Live customer support/No robo calls

##### \$75 - Any City - 3 Months Coverage

I agree with Terms & Conditions and Section 5-5.9.

#### Have a question or comment?

We're here to help.

## Popular Real Estate Terms

Legal time restriction for prosecuting an improper act, or civil or criminal offense. Proceedings must be brought before the expiration date of the applicable federal, state, or local ...

The definition of Hypothecation in real estate is the use of one’s belongings as collateral for a loan. This practice assures the lender that, whether the borrower is able to pay or ...

The definition of a bedroom community, or commuter town in real estate is a unique type of community that merely uses their homes to sleep, while doing everything else offsite. In a bedroom ...

Expected market value of property if sold today. ...

Managing partner of a limited partnership who is in charge of its operations. A general partner has unlimited liability. Member of a partnership who is jointly and severally liable for ...

The process of changing, updating, and altering the appearance and structural characteristics of a building. For example, John remodels the kitchen in his home by replacing the cabinets, ...

A Bill of Sale is a formal document of the sale of goods or the transfer of title for personal property and chattel from one party to another. In sum, a bill of sale is a sort of receipt. ...

(1) Estimating all income and expenses for an accounting period. (2) Financial forecasting, planning, and controlling. It involves using a budget to set and accomplish short-term objectives ...

Interior building trim surrounding windows, doors, and baseboards. Interior trim is both decorative and functional. It comes in several different styles and serves to finish the adjoining ...