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Chapter 8. Understanding Mortgages—And G... > Understanding Mortgage Amortization

Understanding Mortgage Amortization

The term amortization refers simply to paying off a loan by making regular payments. An amortization schedule lists all of those payments and breaks each one down into principal and interest components.

Let’s see how this works. When you make your first payment on a mortgage, part of the payment is for that month’s interest charge on the loan. The remainder of the payment goes toward the principal and reduces the balance you owe.


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