By Jeff Adolph
Dictionary of Terms
A
Amortization
Amortization refers to the pay-out of a mortgage over the allocated time-frame of the loan.
Let me explain...
When you take out a mortgage it is taken out over a specific number of years, such as a 30 year term. And, a mortgage consists of two parts, an interest payment and a principal repayment. When you first begin repaying your mortgage your interest payment is far greater than your principal repayment. However, as the principal of your mortgage decreases so to does the amount you will repay in interest, and over time your interest repayment will be far less than your principal repayment, so that you pay the loan off in the number of years allocated.
The day that you pay off your mortgage is the day that your loan has been amortized.
Image Source: Microsoft Clipart
------------------------------------------------------------------
*RealQuestions RealAnswers*
Click on Comments below and share your thoughts and opinions, ask a real estate question or offer story suggestions...
-----------------------------------------------------------------
© 2006+ Jeff Adolph GayRealEstate USA
Proudly Sponsored By:
Comments