What is meant by amortization term?

What is meant by amortization term?

• A. The total interest paid over the loan
• B. The type of loan obtained
• C. The length of time required to amortize the mortgage loan
• D. The minimum payment due each month

Answer: (C)

The amortization term refers specifically to the length of time required to fully pay off a mortgage loan through regular monthly payments, which cover both the principal and the interest over that duration. This term is crucial as it determines the duration over which the borrower makes payments, and thus influences both the size of each payment and the total interest paid over the life of the loan. For example, common amortization terms for mortgage loans include 15 or 30 years. A shorter amortization term generally leads to higher monthly payments but less interest paid over the life of the loan, while a longer term usually results in lower monthly payments but more total interest paid over time. Understanding the amortization term helps borrowers assess their financial commitments and make informed decisions based on their ability to repay the loan within that specified timeframe.

The amortization term refers specifically to the length of time required to fully pay off a mortgage loan through regular monthly payments, which cover both the principal and the interest over that duration. This term is crucial as it determines the duration over which the borrower makes payments, and thus influences both the size of each payment and the total interest paid over the life of the loan.

For example, common amortization terms for mortgage loans include 15 or 30 years. A shorter amortization term generally leads to higher monthly payments but less interest paid over the life of the loan, while a longer term usually results in lower monthly payments but more total interest paid over time.

Understanding the amortization term helps borrowers assess their financial commitments and make informed decisions based on their ability to repay the loan within that specified timeframe.