Amortization
Paying off a loan through regular payments over a set term. Early payments go mostly to interest; later ones go mostly to principal. An amortization schedule shows that split for every payment.
Also called: amortization schedule, amortizing
Related terms
The amount you borrowed, or the part of it you still owe. Each payment covers interest first, and the rest pays down principal, which builds equity.
The percentage a lender charges to borrow money, used to figure the interest part of each payment. It does not include fees, which is why the APR is often higher.
A mortgage whose interest rate stays the same for the life of the loan, so principal and interest payments never change. Taxes and insurance in the payment can still go up.
Paying a lump sum toward principal and having the lender recalculate your payment over the remaining term at the same rate. It costs far less than refinancing, but not every lender or loan type allows it.
A loan with smaller payments for a set term followed by one large final payment of the remaining balance. Borrowers usually plan to sell or refinance before it comes due.