Amortization
Amortization is the process of paying down a mortgage over time through regular payments that include both interest and principal. Although each payment reduces the loan balance, the portion applied to interest versus principal changes throughout the life of the mortgage.
In the early years, a larger share of each payment goes toward interest, while a smaller portion reduces the principal. Over time, as the balance decreases, more of each payment is applied to principal, accelerating the reduction of the remaining loan amount.
Why this matters:
Many borrowers expect their mortgage balance to decline evenly with each payment, but amortization explains why progress can feel slow at first. Understanding amortization helps homeowners see the real impact of making extra payments, choosing a shorter amortization period, or refinancing at different points in the mortgage lifecycle.
Related Mortgage Terms
Often confused with:
Amortization Period — The length of time it takes to pay the mortgage off in full.
Closely related:
Compound Interest — Helps explain how interest costs add up over time.
Mortgage Term — The time your current rate/contract lasts (not the full payoff timeline).
Next step:
Amortization Period — See how a longer or shorter amortization changes payments and total interest.