Definition

Amortization refers to the spreading out of expenses over a specific period of time. In real estate, amortization can refer to paying of debt (such as mortgage or other type of loan) with a fixed repayment schedule in regular installments over a period of time. As opposed to repaying interest-only loan, a loan featuring an amortization schedule requires regular monthly payments that goes not only towards interest, but toward principal as well. With an interest only loan, principal is repaid fully at the end of the loan period and a borrower makes interest only payments over the loan period.