what is amortization period

An amortization period is the length of time it takes a borrower to pay back the full amount of a loan principal plus the associated cost of borrowing (interest) . It is typically set out in months or years, and the loan principal is paid according to an amortization schedule, usually through equal monthly installments. A portion of each loan payment goes toward the loan principal while the rest covers interest charges. The period is the timing of each loan payment, often represented on a monthly basis, and each row on an amortization represents a payment. An amortization schedule or table details the timing of every payment you will make over the life of your mortgage, indicating how much of each payment went to the principal loan and applied to interest. The amortization period refers to how long it will take to pay off your mortgage in full. Longer amortization periods tend to give the borrower increased flexibility, enabling them to pre-pay the loan if they have excess cash, rather than tying them to a payment schedule they can’t meet. The amortization period is usually calculated using a table called an amortization schedule.