What is an amortization?

Also called an amortization schedule

An amortization is the amount of years it will take to pay down your entire mortgage. This is different from a mortgage term. Payments on a mortgage, which consist of principle and interest, depend on the amount of years you have amortized your mortgage for. You will typically see a 25 year or a 30 year amortization.

For example, if you have a five year mortgage for $200,000.00, at a fixed interest rate of 3%,  amortized over 25 years. Your monthly payments will be $948.42. Let us assume you do not change your monthly payments at all. Over that 25 year period, your total payments for principle and interest will be $284,526.79. Of that, $84,526.79 will be for interest only.

If you have a five year mortgage for $200,000.00, at a fixed interest rate of 3%,  amortized over 30 years. Your monthly payments will be $843.21. Let us assume you do not change your monthly payments at all. Over that 30 year period, your total payments for principle and interest will be $303,554.90. Of that, $103,554.90 will be for interest only.

Mortgage Details25 Year Amortization30 Year Amortization
Amount of Mortgage$200,000.00$200,000.00
Interest3.00%3.00%
Monthly Payment$948.42$843.21
Total Payments$284,526.79$303,554.90
Interest$84,526.79$103,554.90