Real Estate Term
Amortization
The process of paying off a loan over time through regular payments that cover both principal and interest.
What is Amortization?
Amortization is the length of time it takes to pay a mortgage down to zero through regular payments of principal and interest, commonly 25 years in Canada. Each payment covers the interest owed plus a portion of the principal, so early payments are mostly interest and later payments chip away more at the balance. A longer amortization lowers your monthly payment but increases the total interest you pay, while a shorter one does the opposite and builds equity faster.
Frequently asked questions
Related terms
Fixed-Rate MortgageA mortgage with an interest rate that remains constant throughout the term.Interest RateThe percentage charged by a lender for borrowing money, typically expressed as an annual rate.Down PaymentThe portion of the purchase price paid upfront by the buyer, typically expressed as a percentage.EquityThe difference between a property's market value and the amount owed on the mortgage.PrincipalThe amount of money borrowed in a mortgage, excluding interest.MortgageA loan used to purchase real estate, with the property serving as collateral.
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