Amortization — Financial Glossary

What is amortization?

Amortization is the process of paying off a debt over time through regular, scheduled payments. Each payment is split between principal (the amount you borrowed) and interest (the cost of borrowing).

How it works

In the early years of a mortgage, most of your payment goes toward interest. Over time, as the principal balance decreases, a larger share of each payment goes toward principal. This shift is shown in an amortization schedule — a table that breaks down every payment over the life of the loan.

Use our Mortgage Calculator to generate a full amortization schedule for your loan.