Amortization

Gradual reduction of the mortgage debt through periodic payments scheduled over the mortgage term. The spreading of the cost of certain assets over more than one accounting period.

A payment plan that enables you to reduce your debt gradually through monthly payments. The payments may be principal and interest, or interest-only. The monthly amount is based on the schedule for the entire term or length of the loan.

Amortization (or amortisation) is the process of decreasing, or accounting for, an amount over a period. The word comes from Middle English amortisen to kill, alienate in mortmain, from Anglo-French amorteser, alteration of amortir, from Vulgar Latin admortire to kill, from Latin ad- + mort-, mors death. When used in the context of a home purchase, amortization is the process by which your loan principal decreases over the life of your loan. With each mortgage payment that you make, a portion of your payment is applied towards reducing your principal and another portion of your payment is applied towards paying the interest on the loan. An Amortization table shows this ratio of principal and interest and demonstrates how your loan's principal amount decreases over time. Amortization is generally known as depreciation of intangible assets of a firm. Amortization is also used in the context of zoning regulations and describes the time in which a property owner has to conform or relocate when the property's use constitutes a preexisting nonconforming use under amended zoning regulations.