Plain meaning
The period over which a mortgage would be fully repaid if scheduled payments continued as planned.
Also called
mortgage amortization
30-year amortization
25-year amortization
Key points
- A longer amortization period usually lowers required payments but increases total interest over time.
- A shorter amortization period usually raises payments but reduces total interest.
- Federal rules can limit amortization periods for insured mortgages.
- Amortization is different from the mortgage term, which is the length of a specific mortgage contract.
Why it comes up
Mortgage-reform articles often discuss amortization because it affects affordability, borrower qualification, and total borrowing cost.