In one sentence
The table setting out how each payment splits between principal and interest over the loan term.
The longer version
Amortization determines how fast the balance pays down. A 25-year amortization on a 10-year loan means a substantial balloon at maturity; full amortization eliminates it. The schedule drives payment size and payoff math.
Servicers board the schedule from the loan documents, and errors here create payment disputes, which is why boarding verifies against source documents.
Common questions
- What is an amortization schedule?
- A table showing each payment over a loan's life, split between interest and principal, with the remaining balance after each payment.
- How do you read an amortization schedule?
- Early payments are mostly interest and later ones mostly principal. The balance column shows what is owed after each payment, including the balloon at maturity if the term is shorter than the amortization.
- What is the difference between term and amortization?
- The term is when the loan matures. The amortization is the period over which payments are calculated. A ten-year term on a thirty-year amortization leaves a balloon at year ten.
Keep reading
- How life companies run commercial mortgage operationsThe long servicing tail.
- The due diligence checklist, built to be runChecklists as systems, not documents.
- The commercial loan closing processThe five stages from term sheet to funded.
- Commercial loan softwareWhere this sits in the lending stack.
- Commercial real estate loan calculatorRun the payment and the balloon on your own loan.