Fully Amortizing Payment

AAA

DEFINITION of 'Fully Amortizing Payment'

A periodic loan payment, part of which is principal and part of which is interest, where if the borrower makes payment according to the loan's amortization schedule, the loan will be paid-off by the end of its set term. If the loan is a fixed-rate loan, each fully amortizing payment will be equal an amount. If the loan is an adjustable-rate loan, the fully amortizing payment may change as the interest rate on the loan changes.

BREAKING DOWN 'Fully Amortizing Payment'

These payments are often associated with payment option ARMs which offer the borrower four different monthly payment options: a 30-year fully amortizing payment, a 15-year fully amortizing payment, an interest-only payment, and a minimum payment.

On any loan product which allows the borrower to make payments which are less than the fully amortizing payment early in the life of the loan, subsequent fully amortizing payments later in the life of the loan will be equivalently increased to make the loan pay-off by the end of its originally scheduled term.

RELATED TERMS
  1. Amortization Schedule

    A complete schedule of periodic blended loan payments, showing ...
  2. Negatively Amortizing Loan

    A loan with a payment structure that allows for a scheduled payment ...
  3. Self-Amortizing Loan

    A loan for which the periodic payments consist of both principal ...
  4. Payment Option ARM

    A monthly adjusting adjustable-rate mortgage (ARM) which allows ...
  5. Negative Amortization

    An increase in the principal balance of a loan caused by making ...
  6. Adjustable-Rate Mortgage - ARM

    A type of mortgage in which the interest rate paid on the outstanding ...
Related Articles
  1. Home & Auto

    Choose Your Monthly Mortgage Payments

    Exotic mortgages allow you to decide how much to pay. Find out how much they really cost.
  2. Economics

    How Interest Rates Affect The Housing Market

    Understand how rate changes can affect home prices, and learn how you can keep up.
  3. Options & Futures

    Make A Risk-Based Mortgage Decision

    Find out how to choose which mortgage style is right for you.
  4. Home & Auto

    Option ARMs: American Dream Or Mortgage Nightmare?

    Option adjustable rate mortgages could make or break your home-buying experience.
  5. Options & Futures

    This ARM Has Teeth

    Find out how to avoid getting bitten when your mortgage rate resets.
  6. Economics

    What Happens in a Default?

    Borrowers are in default when they don’t honor a debt, whether their failure is intentional or not.
  7. Options & Futures

    Use Options to Hedge Against Iron Ore Downslide

    Using iron ore options is a way to take advantage of a current downslide in iron ore prices, whether for producers or traders.
  8. Budgeting

    The 7 Best Ways to Get Out of Debt

    Obtain information on how to put together and execute a plan to get out of debt, including the various steps and methods people use to become debt-free.
  9. Home & Auto

    Understanding Rent-to-Own Contracts

    They can work for you or against you. Here's how to negotiate a fair one.
  10. Home & Auto

    Avoiding the 5 Most Common Rent-to-Own Mistakes

    Pitfalls that a prospective tenant-buyer could encounter on the road to purchase – and how not to stumble into them.
RELATED FAQS
  1. When do I need a letter of credit?

    A letter of credit, sometimes referred to as a documentary credit, acts as a promissory note from a financial institution, ... Read Full Answer >>
  2. Can I take my 401(k) to buy a house?

    Once you reach 59.5, you can use the funds in your 401(k) retirement savings account to buy a house or any other expense ... Read Full Answer >>
  3. Can I use my 401(k) as a collateral for a loan?

    Although federal Internal Revenue Service, or IRS, regulations prohibit using a 401(k) account as collateral for a loan, ... Read Full Answer >>
  4. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  5. Why do commercial banks borrow from the Federal Reserve?

    Commercial banks borrow from the Federal Reserve primarily to meet reserve requirements when their cash on hand is low before ... Read Full Answer >>
  6. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Recession

    A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, ...
  2. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  3. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  4. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  5. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  6. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!