What Is Loan
Amortization?

Applying for and receiving a mortgage from a lender is a commitment that will last for many years. Over time and with each payment made, you begin to repay the loan, earning equity in return. Through the process of getting a mortgage, you have agreed to pay the cost of the home as well as the interest that accrues. The type of mortgage you choose as well as the interest rate will determine your monthly payment.

The amortization of a loan is the time it will take to pay it off in full. With each mortgage payment you make, the overall amount owed is reduced. Mortgage loan amortization shows the amount of each monthly payment that goes toward the principal and what portion goes toward the interest that you’ll incur over the length of the loan.

A loan amortization table provides insight on the ratio between the principal and interest payments made each month. It also provides you with a good idea of just how much the principal of a loan will lessen over a period of time as well as the total interest paid at the end of the loan period. It’s also a helpful way to analyze loan differences and gain an understanding of how long it’ll take to repay the loan in its entirety.

In many cases, lenders will allow you to make additional payments. This will decrease the overall length of time it takes to pay off your loan. If you have the means to begin to pay a little extra, it will help increase your home equity faster.

Mortgage amortization is another aspect to consider when choosing a mortgage. There are online amortization calculators to help you get a better sense of how long it’ll take to pay off your mortgage. Speak to your mortgage broker for guidance.