Amortization

When you reduce the size of your loan through regular, periodic payments

When you make monthly payments that cover both the principal and interest, you are amortizing the loan. On the other hand, interest-only payments delay amortization since you do not pay down the principal.

Example: How a loan amortizes over 20 years

$150,000 fixed rate loan at 7%

		Year	Monthly payment	Principal	Interest	Balance
		1	$1,039.69	$191.57	$848.12	$149,808.43
		5	1,039.69	251.11	788.58	139,218.76
		20	1,039.69	692.81	346.88	60,656.48
		The longer you hold onto your mortgage, the more of your monthly payment goes towards the loan's principal.

See Also:	Amortization schedule
Compare To:	Negative amortization

   Save an hour at the dealer. Apply now and drive off today.
   Request a new car price quote

   Borrow for less even if you don't own a home.

	Auto Loan
	Home Loan
	Home Equity Loan
	Appraisals
	Commercial Mortgage
	Down Payment
	Loan Programs