Amortization
Names and abbreviations on this page
CFPB — Consumer Financial Protection Bureau. United States regulator for consumer financial products.
Housing terms & practical skills
What it means
Loan amortization is the scheduled reduction of a balance through payments over time. In a typical fully amortizing fixed-rate mortgage, the combined principal-and-interest payment stays level while its allocation changes. Other loan types can work differently.
Related skills
Read a scheduleFind each payment's principal and interest portions.
Compare termsUnderstand how repayment length affects payment size and total interest.
Distinguish totalsKeep taxes, insurance and fees outside a principal-and-interest-only comparison.
An everyday example
Early in a typical mortgage, a larger share of the principal-and-interest payment covers interest because more principal remains outstanding. Later, more of that payment reduces the balance.
What to check
A schedule assumes the stated payment pattern and loan terms. Variable rates, missed payments and extra principal payments can change the result.