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Mortgage Dictionary -> Amortization

Amortization is the act of paying off debt over a period of time using scheduled payments. Part of the payments goes towards repaying the mortgage principal and the rest goes towards the loan interest. Mortgage loans are one of the most popular amortized loans. In the beginning of every amortized loan the greater part of the scheduled payments go toward repaying the loan interest, and the closer you get to the end of the amortization period the bigger chunk of the payment goes towards repaying the principal.

Some mortgage lenders allow borrowers to make additional payments on top of their scheduled payments and to apply those payments against the loan principal. This way the borrower shortens the loan amortization period, by repaying off the loan principal faster, which results in substantial interest savings.

An easy way to find out how much will be your monthly payments, given the mortgage loan principal and interest rate is to use a mortgage calculator. Many websites offer free mortgage calculators, which are straightforward and easy to use. Some of these calculators can even show you the amortization schedule of the mortgage loan.