Amortization is the reduction of the value of an asset by prorating its cost over a period of years.The slow elimination of a debt or mortgage, with normal payments over a specific time frame. These payments must be enough, to pay at least both the principal and interest.
Amortization is a method for repaying a loan in equal installments. Part of each payment goes toward interest due for the period and the remainder is used to reduce the principal (the loan balance). As the balance of the loan is gradually reduced, a progressively larger portion of each payment goes toward reducing principal.
Loans are amortized over different periods of time. The longer the amortization period, the lower the payment, however, this incurs more interest over time.
Pay particular attention to the Truth In Lending and if after a set amount of months you notice a lump sum payment, this is a balloon mortgage.
An Amortization table can be included with your Good Faith Estimate. You can request for a Amortization table from a Mortgage Professional.
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