The gradual retirement of a debt by
means of periodic partial payments of
principal and interest.
Amortized loans are commonplace both for
residential and commercial properties.
Detailed printouts assist in explaining the
gradual retirement of the debt through
periodic payments of principal and interest.
The amortized mortgage provides for a
blended payment (weekly, bi-weekly, monthly,
semi-monthly, or other periodic installments
during the loan term). Amortized loans,
through the use of a blended payment,
provide a steadily declining interest
portion along with an increasing principal
portion for each successive payment. In
combination, these blended payments result
in the gradual reduction in the mortgage
balance over the amortization period. See
the example below.
Example of Amortization
Buyer Wong has agreed to a mortgage
based on an initial sum of $50,000 amortized
over 25 years with blended principal and
interest monthly payments of $586.94. Wong
requires a report detailing the principal
and interest portions of each payment along
with the balance for the first two years.
Salesperson Lane, of ABC Realty Inc.,
obtains a computer printout of the
amortization schedule. The printout shows
the gradual reduction of principal through
successive payments. Wong can analyze the
interest and principal portions of each
payment and successive balances during the
24-month period. If all payments were made
for the full amortization period, the debt
would be completely paid.
The time period required to completely
retire the debt through scheduled payments
of principal and interest.
Real estate practitioners commonly use
mortgage payment factors to calculate
principal and interest payments based on
varying loan amounts and amortization
periods. While payment factors are commonly
referred to regarding monthly time periods,
weekly, bi-weekly, and semi-monthly payment
factors are also provided.
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