Mortgage loan amortization is the process of paying off a mortgage over time through a series of regular payments. A mortgage is a loan that is used to purchase a property, and the borrower agrees to pay back the loan amount plus interest over a period of time. That can be 15 years, 20 years, 30 years, etc.
The payments on a mortgage loan are typically made monthly, and each payment is divided into two parts: principal and interest. The principal is the amount of the loan that is being paid off, and the interest is the cost of borrowing the money.
At the beginning of the loan, most of the payment goes toward paying the interest, while only a small portion goes toward paying off the principal. Over time, the balance shifts so that more of the payment goes toward paying off the principal and less goes toward paying interest.
Side note: Some homeowners make an extra payment each month (can be any amount), as long as the minimum monthly payment is already paid. That extra payment can go directly to the “Principal” balance, thus paying less interest over time and shortening your loan term dramatically. (speak to your mortgage representative for more detailed info on that option).
The way that the payments are structured is called the amortization schedule. An amortization schedule shows the amount of each payment, the amount that goes toward paying the principal, the amount that goes toward paying the interest, and the remaining balance on the loan after each payment.
The length of the mortgage loan and the interest rate determine the amount of each payment, and the total amount of interest paid over the life of the loan. Generally, the longer the term of the loan, the more interest will be paid, but the monthly payments will be lower.
Overall, mortgage loan amortization is the process of paying off a mortgage loan over time through regular payments that are structured to pay off both the principal and interest and the amount paid toward each change over time until the loan is fully paid off.