Video transcript: Mortgage amortization

On screen:

What's amortization?

On screen:

Ja Yung, Mortgage banker

Ja:

Amortization is the relationship between the principal and interest portion of your payment. As the time goes on, you pay less interest and more principal. Your mortgage payment actually stays the same. So while you, over time, may pay less in interest, you actually have more of your payment going towards principal, which is ultimately paying down the principal of your loan.

On screen:

What's an amortization schedule? The amortization schedule is a layout. It's basically kind of like a map of, let's say, 30 years if that's how long your loan is, and it will tell you payment by payment exactly how much of it is going towards principal and how much of it is going towards interest.

On screen:

What's important to know?

Ja:

It's important to keep in mind because of the fact that you have to remember that you do pay a larger portion of the interest in the beginning of the loan. So if you are thinking about going into a home and maybe it's a starter home, you're only going to be there for three to five years, when you go to sell that home, you're going to owe a majority of that principal balance still because most of that period has been paying interest.

On screen:

Amortization

• Is the relationship between principal and interest
• You pay more interest in the beginning
• And you pay more principal towards the end

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