The process of paying off a loan through regular installments that cover both principal and interest. Each payment reduces the loan balance. In the early years of a mortgage, most of each payment goes toward interest. Over time, more goes toward principal. A 30-year fixed-rate mortgage is fully amortized — meaning it is paid off completely by the end of the term.
Definition reviewed by Renzo Johnson, Licensed MLO, NMLS #PENDING. Last updated February 2026.