The schedule by which your mortgage gets paid off over time. Early payments are mostly interest; later payments are mostly principal — but the total amount stays the same each month.
Amortization is the math that runs your mortgage. The total monthly payment stays the same throughout the loan (on a fixed-rate mortgage), but the split between interest and principal shifts as you pay it down.
In the first year of a 30-year mortgage, roughly 85% of your payment goes to interest and only 15% to principal. By year 15, it's closer to 50/50. By year 25, you're putting most of the payment toward principal. That's amortization at work.
An amortization schedule (your lender provides one at closing) shows you exactly how much of each monthly payment goes to interest and how much to principal. It's worth looking at — most borrowers are surprised by how slowly the principal gets paid down in the early years.
Example
On a $320,000 mortgage at 6.5% with a $2,022 monthly payment: month 1 = $1,733 interest + $289 principal. Month 180 = $1,127 interest + $895 principal. Month 360 = $11 interest + $2,011 principal.
Also known as
amortization schedule, amortization table, payment schedule