Amortize glossary
Key terms
In one paragraph
These terms explain how mortgage interest and amortization work, each with a primary source.
Last reviewed against the primary sources listed below.
- Amortization
- Paying a loan down over time with scheduled payments of principal and interest. Source: CFPB: What is amortization? (explained with an auto loan example)
- Interest in arrears
- Interest paid for the month that just ended, not the month ahead. Source: CFPB: What is amortization? (explained with an auto loan example)
- Prepayment penalty
- A fee some loans charge for paying off early, limited by federal rules. Source: CFPB: What is a prepayment penalty?
- Payoff statement
- A servicer's statement of the exact amount needed to pay off the loan on a date. Source: CFPB: What's the difference between a mortgage lender and a mortgage servicer?