What is a Fully Amortizing Loan?

Fully amortizing loans are consist of payments being split essentially into two parts with a portion going to the interest and a portion going to the principal loan balance.

Types of Loans

Fully amortizing loans can be either fixed or adjustable rate loans. The primary difference is that with a fixed rate, the payment will stay consistently the same, with the final payment perhaps being smaller. A typical example of a situation such as this would be the 30 year fixed rate conventional mortgage. With an adjustable rate loan that fully amortizes, the payment will fluctuate as the interest rate changes.

Regardless of which type of fully amortizing loan that you have, when the loan reaches the end of its life, the home will be paid off and nothing more owed on it. This is an ideal situation for any homeowner planning to be in the house the rest of their lives.