Amortization and loans can be a confusing topic. I’m here to help clear that up for you and make it a little easier for you to understand. I think industry guys like to make it harder than it is.
It can also refer to spreading out capital expenses for intangible assets over a set duration of time (usually the life of the asset) for tax and accounting purposes.
When it comes to home and mortgage loan payments, the majority of the initial payments will go toward interest. As time goes on, a greater percentage of the payments will go toward the loan’s principal.