Amortization
The repayment of a loan by installments. |
Similar financial terms
Amortization scheduleThe principal repayment of a bonds issue can call for either (a) the total principal to be repaid at maturity or (b) the principal repaid over the life of the bond. The latter refers to a schedule of payments which is normally called an amortization schedule. Loans that have this feature are car loans and home mortgage loans.
Amortization factor
Planned amortization class CMO
(a) One class of CMO that carries the most stable cash flows and the lowest prepayement risk of any class of CMO. Because of that stable cash flow, it is considered the least risky CMO. (b) A CMO bond class that stipulates cash-flow contributions to a sinking fund. With the PAC, principal payments are directed to the sinking fund on a priority basis in accordance with a predetermined payment schedule, with prior claim to the cash flows before other CMO classes. Similarly, cash flows received ...
Negative amortization
A loan repayment schedule in which the outstanding principal balance of the loan increases, rather than amortizing, because the scheduled monthly payments do not cover the full amount required to amortize the loan. The unpaid interest is added to the outstanding principal, to be repaid later.
Loan amortization schedule
The schedule for repaying the interest and principal on a loan.
Negative amortization
A gradual increase in mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the remaining balance to create "negative" amortization.
Planned Amortization Class
A security which is structured to have a reasonable life expectancy provided the prepayment speeds stay within the defined ranges. The scheduled interest and principal payments tend to be more stable for these tranches relative to the other parts of the deal.
