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Simple English definitions for legal terms
amortized mortgage
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A quick definition of amortized mortgage:
An amortized mortgage is a type of loan where the borrower pays back both the interest and a portion of the principal in regular payments. By the end of the loan term, all payments will have fully repaid the loan. This is different from a straight mortgage where only interest is paid during the term and the principal is paid in a lump sum at the end.A more thorough explanation:
An amortized mortgage is a type of mortgage where the borrower makes periodic payments that include both interest and a portion of the principal. By the end of the mortgage term, the borrower will have completely repaid the loan. This type of mortgage is also known as a self-liquidating mortgage.
For example, if a borrower takes out a 30-year amortized mortgage for $200,000 at a fixed interest rate of 4%, their monthly payment would be $955. The payment includes both interest and a portion of the principal, so over time, the borrower's equity in the property increases as the loan balance decreases.
Amortized mortgages are the most common type of mortgage used for home financing. They provide borrowers with a predictable payment schedule and a clear path to full repayment of the loan.