Amortization

Definition

The process of spreading out a loan into a series of fixed payments over time. You'll be paying off interest and principal in different amounts each month, although your total payment remains equal.

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How Amortization Works

When you take out a loan (like a mortgage), your lender calculates a payment schedule.

Early payments: Mostly interest, very little principal.
Later payments: Mostly principal, very little interest.

This is why you build equity slowly at the beginning of a mortgage.

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This tool is for illustrative purposes only and does not constitute professional financial, tax, or legal advice. Calculations are estimates and may not reflect real-world variables or local regulations. Always consult with a qualified professional before making financial decisions.