What is a fully amortized mortgage?

A fully amortized mortgage is characterized by equal monthly payments that cover both the interest and a portion of the principal over the loan’s term. This structure ensures that by the end of the mortgage period, the entire loan balance is paid off, leaving the borrower with a zero balance.

Each payment is calculated based on the loan amount, the interest rate, and the term length, allowing borrowers to budget their finances effectively as they know exactly how much they need to pay each month.

This contrasts with other types of mortgages: loans with varying payments do not provide this predictability; mortgages that are never fully paid off may require a balance at the end of the term; and mortgages requiring a balloon payment at the end involve low monthly payments during the term but necessitate a large final payment to settle the loan. Thus, the clarity and structure of payments make a fully amortized mortgage a popular choice among borrowers.