Which type of mortgage allows for the gradual repayment of the original loan amount over time?

An amortized mortgage is characterized by its structured repayment plan, which includes both principal and interest in each payment. This means that over the course of the loan, the borrower gradually pays off the original loan amount in equal installments, typically over a specified term, like 15 or 30 years. The breakdown of each payment changes over time: early payments consist mostly of interest, while later payments pay down more principal.

This type of mortgage is advantageous for borrowers because it leads to a predictable repayment schedule and ensures that the loan balance reduces to zero by the end of the term. Borrowers can see a clear path to owning their home outright, making it a common choice among those seeking long-term stability in their housing expenses.

In contrast, other mortgage types do not operate with the same repayment structure, which can lead to differing outcomes in loan duration and financial management. For example, an interest-only mortgage allows borrowers to pay only the interest for a specified time, which does not reduce the principal balance during that period. A balloon mortgage typically features lower initial payments followed by a larger final “balloon” payment, while an adjustable-rate mortgage can have fluctuating payments that vary based on interest rate changes, making it less predictable for borrowers.