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Amortization

Amortisation generally refers to the process of spreading the cost of an asset over a period of time. The purpose of amortisation is to spread the cost of an asset over the period of use of that asset in order to obtain an accurate picture of the actual cost.

Mortgage

Amortisation is the principle of paying off part of a mortgage on a regular basis. This means paying off the debt in instalments. Mortgage lenders require an amortisation of two-thirds of the value of the property. For example, if you buy a property, 80% of the property value can be taken out as a mortgage. 20% must come from savings. The advantage of amortisation is that property owners can pay back their debts to the bank. Thus, one can lower the private debt and increase the share in the real estate.

Amortisation of a loan (instalment loan)

Amortisation is also the principle of regular repayment of a loan. When you take out a loan, you have to pay it back in instalments. First you pay the interest and the remaining debt is paid off in small instalments. Gradually, the debt becomes smaller and you have more financial flexibility.