If you have a mortgage the concept and meaning of mortgage amortization should be something you are familiar with. The following guide offers a brief explanation of what mortgage amortization is.
What is Mortgage Amortization?
In the simplest of terms, mortgage amortization is the process by which a loan for the objective of buying a property is repaid. A mortgage loan, which is of course the largest debt that most of us will undertake to settle in our lifetime, is paid back through regular repayments throughout a givrn period of time. Most usually repayments are made on a monthly basis over a term between 25 and 40 years.
The Meaning of Amortization
Amortization has passed into American English via several sources. In latin, any word that includes “mort” generally includes the suggestion of death: motuary, mortify, mortician, rigor mortis etc. In Old French, amortization literally translates as “dead pledge”, which we can understand to mean that the loan agreement (pledge) terminates when the debt is settled or when the property goes into foreclosure.
Most mortgage repayment plans usually involve an element of interest as well as an amortization payment. Initially the interest part of the payment is high. As time passes and the mortgage principal amount decreases through compounded amortization payments, the ratio of interest to amortization payment changes. This means in most cases that more of your monthly payment goes towards settling the actual mortgage debt, which in turn reduces the interest chargable against it. Thus over time a mortgage is amortized.
Ésta página traducida al Castellano - La Amortización de Hipotecas