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Amortization

Definition of term

Amortization means paying off a mortgage balance in equal payments over time. Your monthly payments will stay the same for the life of your loan, but the amount of each payment that goes towards the principal and interest will change over time. When you first take out a home mortgage loan, your monthly payments will primarily go towards interest. As time goes on and you make more payments, a larger portion of each payment will go towards the principal. An amortization schedule can help borrowers understand how they will pay off their loan over time and how the interest and principal balance will change.

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