Mortgage Glossary
Amortization
The schedule of how your loan is paid off over time through regular monthly payments — shifting from mostly interest to mostly principal.
What It Means
Amortization is the process of paying off your mortgage through regular, equal monthly payments over a set period (usually 15 or 30 years).
Each payment is split between interest (the cost of borrowing) and principal (reducing your loan balance). In the early years, most of your payment goes to interest. Over time, more and more goes toward principal.
This is why extra payments early in a mortgage can dramatically shorten your payoff timeline and reduce total interest paid.
Real-World Example
"On a 30-year $300,000 mortgage at 6.5%, your first payment might be roughly $200 toward principal and $1,625 toward interest. Twenty years in, that split flips dramatically."
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Definitions are for educational purposes only and do not constitute financial or legal advice.