The gradual repayment of a mortgage by installments. As you pay back the loan, an increasing amount of each payment is applied to principal and a lesser amount is applied to interest. Amortization is also a process of spreading a cost that is incurred upfront over the term of the loan or life of the asset.
When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance.
|Graduated Payment Mortgage (GPM)|
A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.
|Purchase Money Mortgage|
A mortgage given by the purchaser to secure a loan for part or all of the purchase price. Such a mortgage becomes a lien on the property simultaneously with the passing of title, and if immediately recorded becomes prior to any lien against the purchaser.