Mortgage Amortization Defined

Mortgage amortization refers to the the situation where the balance of the principle balance of mortgage loan declines as the borrower makes continuous payments. Most mortgage loans will have some sort of mortgage amortization, though there are other options available where interest only mortgages are implemented, or even negative amortization.

However, because mortgage amortization is such a positive aspect for the borrower, most will only seek loans that will have mortgage amortization provisions. This is important because a loan that does not have mortgage amortization will essentially mean that the borrower is not doing all that much to lower the principal amount or pay off the loan, regardless of steady payment.

Mortgage amortization will be determined by various factors. When a borrower secures and takes out a mortgage loan, a mortgage amortization table or schedule will be developed in which payments are to be made in certain amount of time over the lifespan of the loan.

Mortgage amortization will depend on the actual principal amount of the loan, as well as the implemented interest rates. Furthermore, the type of loan that is taken out will also have an impact, such as whether it is a fixed rate or adjustable rate loan.

The mortgage amortization table is meant to provide for the schedule in which the payments are to be made in order for the mortgage to be fully amortized. In other words, the mortgage amortization table provides the borrower with the exact amount that is to be covered in each payment, the time table in which each payment is to be made, and when the mortgage loan will be paid off.