Amortization Term

Sam · Posted: Wed Mar 31, 2004 10:31 pm Post subject: Amortization Term

The time period required to completely repay the mortgage loan is referred to as amortization term. It is the time over which the principal amount would be repaid on the basis of periodic installments with interest being paid on the outstanding balance. This is usually expressed as a number of months. Thus, a 30 year fixed rate mortgage has an amortization term of 360 months. Commonly mortgages are amortized over 15 or 30 years i.e. common amortization terms are 180 months or 360 months.

Mortgages are possibly the longest loan to be taken i.e. they 'spread' over the longest period while getting repaid. Mortgages can continue to even 30 years. In general, the shorter the amortization term the lesser is the interest to be paid back. This is the reason why people prefer a shorter amortization term. However, mere opting for shorter amortization periods will not be sufficient. One has to spend more money at each installment in case a shorter repayment period is set. So, one's earnings and financial situation also need to be considered.

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