The process of paying off a loan through regular payments that gradually reduce the principal.
Amortization is the systematic repayment of a loan through scheduled payments. Each payment is split between interest and principal, with the proportion shifting over time. Early in the loan, most of each payment goes to interest; later, more goes to principal. An amortization schedule shows exactly how each payment breaks down over the loan's life.
Monthly Payment = P × (r(1+r)^n) ÷ ((1+r)^n − 1)Where P is principal, r is monthly interest rate, and n is the total number of payments.
A $250,000 mortgage at 6.5% over 30 years has a monthly payment of about $1,580. In year 1, roughly $1,350 goes to interest and $230 to principal. By year 25, the split flips — about $400 goes to interest and $1,180 to principal. Total interest paid over 30 years: about $318,000.
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The ratio of a property's loan amount to its appraised value or purchase price.
The growth in your ownership stake in a property as you pay down the mortgage.
The ratio of net operating income to annual debt payments.
The net cash a rental property generates after all expenses including mortgage payments.
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