Amortization is the process of paying off a loan gradually through regular payments. Each payment is split between interest and principal, but the mix shifts over the life of the loan: early payments are mostly interest, and later ones are mostly principal. An amortization schedule lays out that split payment by payment.
The principal portion of every payment is what builds your equity — sometimes called the “loan paydown” return of owning a rental. A standard 30-year fixed loan fully amortizes to a zero balance by the end of its term; some loans instead are interest-only or end in a balloon payment, meaning they amortize slowly or not at all. (The same word is also used in accounting for spreading the cost of an intangible asset over time.)
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Written and maintained by the Aptoria editorial team
Editorial method reviewed July 28, 2026. Aptoria reviews scope, source fit, examples, limitations, links, and publication gates. This record does not claim attorney, CPA, lender, appraiser, or other independent professional sign-off.
Related terms
Investing metrics
Equity
The portion of a property you actually own — its market value minus what you still owe on it.
Investing metrics
LTV (loan-to-value ratio)
The loan amount as a percentage of a property's value — a core measure of leverage and lender risk.
Financing
PITI
PITI means the monthly principal, interest, property taxes, and homeowners insurance associated with a mortgage housing-payment estimate.
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