Amortization
Amortization is the process of repaying loan principal through a series of payments over time until the debt is paid off. In an amortizing schedule, each periodic payment contains an interest component and a principal component, with principal typically increasing and interest typically decreasing over time (holding rate constant).
- Where it applies
- Generally, not specific to New York
- When it comes up
- Underwriting; closing; servicing
- Property types
- Residential; commercial (where amortizing)
In practice
In underwriting and valuation models, "term" and "amortization period" are distinct (e.g., a 10-year maturity with a 30-year amortization), which materially changes refinance (balloon) risk.
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Related terms
amortization scheduletermmaturityballoon paymentinterest-only
Residential Financing
- Accrual Rate
- Adjustable Rate Mortgage (ARM)
- Application (TRID application)
- Conforming Loan Limit
- Pay Rate
- PMI Automatic Termination
- PMI Cancellation (Borrower-Requested)
- Private Mortgage Insurance (PMI)
- Secured Overnight Financing Rate (SOFR)
- TILA-RESPA Integrated Disclosures (TRID)
General information, not legal, tax or financial advice.