Amortization

[shibuya]

I had only a fuzzy concept of amortization and even come across the term negative amortization. Can I have a simple explanation.

[paddy]

In the context of housing loan, it is simply the process of paying off a loan balance. As you make payments, a certain amount goes toward paying the principal and certain amount to interest. The schedule or table of amortization shows the declining balance as you make payment.

[seneca]

To add on, negative amortization is a type of loan situation that occurs when the monthly payment is not enough to cover the principal or interest, Instead of a declining balance, the balance on the loan actually increases.