Definition: Amortization schedule refers to a detailed list or plan for paying off a mortgage with regular monthly payments. This schedule typically includes a payment that covers interest, principal, and any other expenses related to the loan during each month.
The term "mortgage" is often used interchangeably with "loan." However, when referring to an amortization schedule on a mortgage loan, the term "mortgage" is specifically applied to a loan for housing purposes. The term "mortgage loan" refers to any type of financial transaction involving the sale or lease of real estate property.
In general, the amortization schedule includes information about how much each month's payment will cover interest, principal, and other costs related to the loan. It also lists out the total amount that would be owed by the borrower at the end of the term of the loan, which can be a useful tool for investors to assess potential returns on their investments.
The process of calculating an amortization schedule often involves using the formula for calculating amortization periods or interest payments: Interest = Principal
(1 - (1 + rate / 100))^periods. This formula represents the interest that would accumulate over time based on the annual percentage rate and the number of payments made.
In summary, an amortization schedule is a detailed list of monthly payments required to cover interest, principal, and any other expenses related to a mortgage loan, which helps investors estimate potential returns or losses on their investments.
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