With a Term Mortgage buyers pay the interest only until the full term of the mortgage expires.
Then they pay all the principal or refinance the loan. A term mortgage is a non-amortizing loan.
Term mortgages are used for short term financing such as for construction loans.
The most popular loan payment plan is the fully amortized level-payment mortgage. A fully amortized mortgage is one with regular payments each month of principal and interest. Amortize mean to end or extinguish. The amortized mortgage loan is gradually extinguished by payment.
· The payment remains the same each month. It is a (level payment plan)
With each months payment the amount that is applied toward the principal increases and the amount applied to the interest decreases.
Information courtesy of Rowlett Real Estate School LLC
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