Amortization

Question 1

What is an Amortization Schedule?

Answer 1

The amortization schedule shows how much in principal and interest is paid overtime.

Question 2

What type of Amortization is where borrowers repay a portion of the loan principal each month. As a result, the loan balance drops with each payment?

Answer 2

Positive Amortization

Question 3

What type of Amortization is where borrowers pay off their balance based on the loan’s amortization schedule, which means that the borrower will pay off their loan at the end of the loan’s term?

Answer 3

Fully Amortizing Loan

Question 4

What type of Amortization is the balance between the fully amortized and interest-only loan. Part of the payment will cover some of the principal balance and the rest will cover the interest charges?

Answer 4

Partially Amortized

Question 5

What type of Amortization is interest only payments for a set period of time. Not all interest-only mortgages work in the same way. Requires a balloon payment for the entire principal amount after the interest only payment term expires?

Answer 5

Non Amortized

Question 6

What type of Amortization is when a borrower pays less than the interest due, so the loan amount actually increases, therefore requiring additional payments to bring it to a zero balance?

Answer 6

Negative Amortization