Amortization is a payment to pay of part of a debt or a loan.

This payment is usually periodical. Given that the monthly payment exceed the interest payment for a period, the debt balance or remindning loan balance, is decreasing. (also see: amortization calculator)

In some cases there is a anuity payment plan, that is there is equal payments per period. In this case the amortization part of a payment is the part of the payment that is used to pay off a part of the debt. The remaining part of the payment for the period is paid for the interest accrued on the loan.

A loan is amortized over a period in order to have it paid off (fully or partly) over the loan period.

In your payment plan for a mortgage or loan you will find the amortization part, as well as interest part, per month (or period).

In the case with fixed mortgage interest rates the amortization part is fixed and predictable.

In the case with adjustable mortgage interest rates, the total payment may vary over time, as may the actual amortization in some cases depedning on type of mortgage or loan. However, typically there is a amortzation plan that let you know exactly how large your remaining debt will be at the end of each month (period).

Also see: Amortization Schedule and Amortization Term.

Get more information on Amortization in the Real Estate Forum