Accelerated Amortization

Definition of 'Accelerated Amortization'


Extra payments made towards paying down a mortgage principal. With accelerated amortization, the loan borrower is allowed to add additional payments to their mortgage bill in order to pay off a mortgage before the loan settlement date. The benefit of doing so is reduced overall interest payments.

Investopedia explains 'Accelerated Amortization'


For example, take a mortgage originated for $200,000 at 7% interest for 30 years. The monthly principal and interest payment is $1330.60. Increasing the payment by $100 per month will result in a loan payoff period of 24 years instead of the original 30 years, saving the borrower six years of interest. Paying a mortgage in an accelerated manner decreases the loan premium faster and diminishes the amount of additional interest the borrower is required to pay on the loan.


Filed Under: ,

comments powered by Disqus
Hot Definitions
  1. Benchmark Bond

    A bond that provides a standard against which the performance of other bonds can be measured. Government bonds are almost always used as benchmark bonds. Also referred to as "benchmark issue" or "bellwether issue".
  2. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.
  3. Oil Reserves

    An estimate of the amount of crude oil located in a particular economic region. Oil reserves must have the potential of being extracted under current technological constraints. For example, if oil pools are located at unattainable depths, they would not be considered part of the nation's reserves.
  4. Joint Venture - JV

    A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it.
  5. Aggregate Risk

    The exposure of a bank, financial institution, or any type of major investor to foreign exchange contracts - both spot and forward - from a single counterparty or client. Aggregate risk in forex may also be defined as the total exposure of an entity to changes or fluctuations in currency rates.
  6. Organic Growth

    The growth rate that a company can achieve by increasing output and enhancing sales. This excludes any profits or growth acquired from takeovers, acquisitions or mergers. Takeovers, acquisitions and mergers do not bring about profits generated within the company, and are therefore not considered organic.
Trading Center