Question

Define each amortization.

1.fully amortizing

2.partially amortizing

3.interest only

4.negative amortizing

5.Constant Amortizing Mortgage

Answer 1

Amortization Amortization is process of spreading payment over multiple periodo Amortization can be done for Loans as well as for assets. Here, we will discuss amortization for loan/Mostgage o fully amortizing Mortgage ! A fully amortizing = = = mortgage is a loan is in which both principal and interest are paid fully through installments by the end of term. The installments are pre scheduled. Fully amortizing payment is calcuted amount that is to be paid every month as installment and so that the balance is paid by the end of term. (2) Partially Amortizing Mortgage. It is the amortization = in which full amount of loan or mortgage is not involved, only a partial amount of loan / mortgage is paid through scheduled installments and the remaining balance is : paid in lumpsum at the end on the specific date. The lump sum payment is also known as balloon payment,

1) Interest only! I Interest only I en Interest only amortizing, - only the interest is paid . every month as installment of interest and the principal amount is paid on not included in amortization, so the principal amount remains unchanged. c u Negative Amortizing Negative amortization = Z ' refers to the situation where there is increase in principal balance because the loan payment for any period is even less than the interest charged for that period so, the remaining Balance is added to principal balance , so, in, negative Amortization leads to increase in balance to be paid. 5) Constant Amortizing Mortgagel This is é Z case where the prinupal amount charged, each installment, is some, but the interest is calculated on the remaining principal balance to be paid. This is straight line method of amortization. Here, the installment every month, has same amount of principal to be paid, but the interest varuies.;