Mortgage structure in which scheduled payments include both principal and interest so the balance is fully repaid by the end of the term.
A self-amortizing mortgage is a mortgage structure in which each scheduled payment includes both interest and principal, so the balance is designed to reach zero by the end of the term.
In consumer mortgage language, this is often what people mean by a repayment mortgage. It also overlaps with older labels such as direct-reduction mortgage and level-payment mortgage.
Self-amortizing mortgages matter because they build equity through required payments instead of relying on a later refinancing event or maturity lump sum. That makes them the baseline comparison for more specialized structures such as Interest-Only Mortgage and Balloon Mortgage.
For a standard level-payment mortgage, the scheduled payment can be written as:
Where:
M is the scheduled payment
P is the original principal balance
r is the periodic interest rate
n is the total number of scheduled payments
Early in the loan, more of each payment goes to interest. Later, more of each payment goes to principal.
| Mortgage type | Required payment during the term | End-of-term result |
| — | — | — |
| Self-amortizing mortgage | Principal and interest each period | Balance designed to reach zero |
| Interest-only mortgage | Interest only during the IO phase | Principal still has to be repaid later |
| Balloon mortgage | Partial or limited amortization | Large balance can remain at maturity |
A homeowner takes a thirty-year fixed-rate mortgage. Each monthly payment covers that month’s interest plus some principal. Over time the principal balance falls, and by the end of the mortgage term the scheduled payments have fully repaid the loan.
That is the core self-amortizing structure.
Especially in UK and Commonwealth mortgage language, a repayment mortgage usually means the same basic structure: scheduled payments retire both interest and principal over time.
A self-amortizing mortgage still may allow prepayments, refinancing, or different fixed-versus-variable rate choices. The term describes the repayment pattern, not every contractual feature around it.
Interest-Only Mortgage: Defers principal repayment during the initial payment phase.
Balloon Mortgage: Leaves a large balance due at maturity instead of fully amortizing.
Amortization: The broader debt-paydown concept behind the mortgage structure.
Graduated Payment Mortgage: A stepped-payment alternative that starts easier but raises later payment pressure.
Growing-Equity Mortgage: A scheduled-growth structure aimed at faster payoff.
Open Mortgage: A separate mortgage feature dealing with prepayment flexibility rather than amortization shape.