• The systematic expensing of a portion of the cost of a fixed asset against sales revenue.

• (1) The paying off of debt in regular installments over a period of time. (2) The deduction of certain capital expenses over a specific period of time.

• The repayment of a loan by installments.

• Is the periodic pay down of principal. This is a common feature of most mortgages. Amortize also refers to the accounting write down or reduction in an intangible asset. This creates a charge against income. Amortization can also refer to the reduction in the cost basis of a bond purchased at a premium to par. Sometimes, amortization is used as a synonym for depreciation or other write down of an asset or liability. In the later capacity it tends to apply to intangible assets. See Interest Impact on Installment to Amortize or Amortization.

• The process of reducing a debt through installment payments of principal and interest.

 Embedded terms in definition
Cost basis
Fixed asset
Intangible assets
Intangible asset
Tangible asset
Write down
 Referenced Terms
 Adjustable rate mortgage: Is a loan which has a coupon or interest rate that is subject to change on predetermined reset dates. These loans use interest rate indices as the benchmark rate. Adjustable Rate Mortgages come in many variations. Typically, the reset dates recur every 1, 3, or 5 years; but there are other periods used as well. These loans may have cap and floor features which constrain each reset change in interest rates. There may also be lifetime cap and floor features. Adjustable Rate Mortgages may be strictly amortizing though some have negative Amortization features.A mortgage whose interest rate changes periodically based on the upward or downward movement of a specified benchmark, e.g. six month or one-year Treasury bills.

 Amortization factor: The pool factor implied by the scheduled Amortization assuming no prepayments.

 Amortize: In portfolio accounting, periodic charges made against interest income on premium bonds in anticipation of receipt of the call price at call or of par value at maturity. In the context of a loan, Amortization means the annuity payments that pay off the loan in full.

 Book value: A company's book value is its total assets minus intangible assets and liabilities, such as debt. A company's book value might be more or less than its market value.The strict accounting value of an asset, calculated by subtracting its accumulated depreciation from installed cost. Also, the total value of common equity at the date of the balance sheet.Usually Book Value per Share. Calculated by dividing the net worth of a company (common stock plus retained earnings) by the number of shares outstanding. This is the accounting value of a share of stock, the value of the company's assets that a shareholder would theoretically receive if a company were liquidated.
The book value may have no similarity to the actual cost per share on the stock market (called market value), or even to the sum of money that the shareholder would receive if the company dissolved. Companies that are running their businesses very successfully may sell at many times their book value, while those doing poorly may sell at a discount to their book value.
Increasing book value generally indicates that the company is accumulating assets faster than debt - a good sign. Decreasing book value may be due to research and development expenses, writing down assets, losing money from operations, or issuing more shares.The value at which a debt security is shown on the holder's balance sheet. Book value is often acquisition cost + Amortization accretion, which may differ markedly from market value. It can be further defined as "tax book," "accreted book," or "amortized book" value.

 Bullet: Is a type of credit security which repays the entire principal on the maturity date. Prior to the maturity or prepayment of the bond, interest payments are to be made in accordance with the payment schedule. Treasury and Corporate bonds pay off in lump sum principal amounts whereas many mortgages pay off on an Amortization basis.

 Related Terms
 Amortization factor
Earnings before interest, taxes, depreciation, and amortization
Interest impact on instalment to amortize or amortization
Loan amortization
Loan amortization schedule
Negative amortization
Planned amortization class
Targeted amortization class

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