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How Amortization Works


How Amortization Works: Author’s Note

It's kind of crazy to think that the home mortgage, as we know it, didn't exist until the 1930s. Before that, folks had to throw down a 50 percent down payment and the terms of the home loan were as short as five to seven years. How many of us could afford a home if we had to come up with a check for half of its value just to close? That's why amortization is such a powerful way to make a big, long-term purchase. The monthly payments stay low while you slowly chip away at the principal. Do yourself a favor, though, and never look at the "total interest paid" line on the amortization calculator. It will make you weep like a child.

Sources

  • Cliffsnotes.com. "Intangible Assets" (Accessed Jan. 30, 2011.) http://www.cliffsnotes.com/study_guide/Intangible-Assets.topicArticleId-21081,articleId-21080.html
  • FinancialWeb. "An Introduction to Depreciation and Amortization" (Accessed Jan. 29, 2011.) http://www.finweb.com/investing/an-introduction-to-depreciation-and-amortization.html#5min
  • Harper, Douglas. Online Etymology Dictionary. "Mortgage" (Accessed Jan. 30, 2011.) http://www.etymonline.com/index.php?search=mortgage&searchmode=none
  • U.S. Department of Housing and Urban Development. "The Federal Housing Administration (FHA)" (Accessed Jan. 30, 2011.) http://www.hud.gov/offices/hsg/fhahistory.cfm

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