Real Estate Loan Amortization

Loan Amortization refers to the process of paying off a loan over time through regular payments. A portion of each payment is for interest while the remaining amount is applied towards the principal balance.

The percentage of interest versus principal in each payment is determined in an amortization schedule.

While a portion of every payment is applied towards both the interest and the principal balance of the loan, the exact amount applied to principal each time varies (with the remainder going to interest).

An amortization schedule reveals the specific monetary amount put towards interest, as well as the specific amount put towards the principal balance, with each payment. Initially, a large portion of each payment is devoted to interest.

As the loan matures, larger portions go towards paying down the principal.