Amortization Mortgages-Free Mortgage Advice

Understanding Amortization Mortgages

Many prospective home buyers are aware of the term, amortization mortgage, but that does not mean to say that they understand all its implications. Because home loans are about the largest financial commitment many people will enter into, it is essential that they familiarize themselves with amortization mortgages amongst other considerations.

There is an interesting article covering amortization mortgages on the Free Mortgage Advice web site, Amortization Mortgages-Free Mortgage Advice, and an extract is reproduced below:

"An amortization mortgage requires the repayment of the amount borrowed by periodic repayments, usually monthly, over an agreed period of time.

Amortization mortgages are frequently used to pay off home loans by equal monthly installments. There are two parts to an amortization mortgage, namely the principal amount that is the sum of money borrowed, and the interest amount that is the benefit due to the lender for providing the money.

The principle is at its highest at the time the loan is initiated, and in the early years most of the monthly repayments mainly pay off the interest, with a relatively small sum being applied to reduce the amount borrowed. During the latter years the situation reverses and a greater proportion is applied against the principle. Some borrowers have failed to grasp this aspect and have been disappointed, to learn how much of the principle remains, if they have decided to pay off their mortgage, even after an initial period of ten years or so into a thirty year term."

To read the full article please visit the Free Mortgage Advice Web Site.
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amortization mortgages