Amortization
Amortization is the process by which a mortgage loan is paid down over time through scheduled monthly payments that include both principal and interest.
In the early years of a mortgage, a larger portion of each payment goes toward interest. As the loan matures, the balance shifts and more of each payment goes toward reducing the principal. This schedule is predetermined at closing based on your loan term and interest rate.
Amortization is not a trick or a hidden cost — it is simply the math behind how fixed-rate loans are structured. Every borrower follows this same payment curve.
Why This Matters: Understanding amortization helps you see how equity builds over time and why making extra principal payments early in the loan can save thousands in interest over the life of the mortgage. Learn more in our guide to understanding your monthly mortgage payment.
Common question
Why do I pay more interest in the early years of my mortgage?
Amortization front-loads interest. In the early years, a larger share of each payment goes to interest and a smaller share to principal. Over time, that balance shifts.
Can extra principal payments save me money?
Yes. Paying extra toward principal early in the loan reduces the balance faster and can save thousands in interest over the life of the mortgage.
Related Topics
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