Amortized Loan Principal Payouts

Definition

The portion of each scheduled loan payment that reduces principal, so the loan is paid down over its term rather than in one lump sum at maturity; these payments consume cash that would otherwise be available for distributions. For residential mortgages, a qualified mortgage generally may not have regular payments that increase the principal balance or defer its repayment, and must be underwritten on a payment schedule that fully amortizes the loan^[1].

Federal law

A market and contract term. No Act of Congress defines it; the federal laws below apply as described.

1. Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, § 1412, 124 Stat. 2145 (Truth in Lending Act § 129C(b), 15 U.S.C. § 1639c(b)). Requires qualified mortgages to avoid negative amortization and principal deferral and to be underwritten on a fully amortizing schedule (15 U.S.C. § 1639c(b)(2)). Official text: govinfo.gov, U.S. Government Publishing Office.