Amortized (uh MAWR tized) mortgages are loans in which you repay your debt through regular payments that both reduce your principle and cover the interest due each month. Your monthly payment amount is based on a specific payment schedule and a specific interest rate. If you complete your payments according to the schedule, you'll own your home at the end of the loan term. Amortized mortgages with longer repayment periods, such as 30 years, typically have lower scheduled monthly payments, but result in more interest paid in the long run. If your monthly mortgage payments don't contribute to reducing your principle balance or don't cover the amount of interest you owe, you have what's called a non-amortizing mortgage. This can occur with some adjustable rate mortgages, particularly when interest rates rise rapidly and your monthly payments aren't enough to cover the increase in monthly interest costs. Any amount of interest not paid is added to the principal balance. This means that even when the original term of the loan ends, your remaining debt could be larger than the original mortgage amount.
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