Fully Amortizing Payment

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.

Investopedia explains '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.



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