Amortisation
Amortisation is the process of paying down a loan over time through scheduled payments. For mortgages it explains the interest/capital split.
Last verified: 10/03/2026
Definition
Amortisation describes how a loan balance reduces over time through regular payments.
For a standard repayment mortgage, each payment is split into:
- interest (cost of borrowing), and
- principal (reduces the balance)
Why it matters
Early in the mortgage, the balance is high, so interest is a larger part of the payment. As the balance reduces, the interest portion tends to fall.
Related terms
- Repayment mortgage
- Overpayment