Mortgage Amortization

The process of paying off a mortgage over time through regular payments that cover both principal and interest.

What is Mortgage Amortization?

Amortization is the process of gradually paying off a mortgage through scheduled payments over the loan tenure. Each monthly payment is split between principal (reducing the actual debt) and interest (the bank's charge). In the early years, the majority of each payment goes to interest, with the principal portion increasing over time. An amortization schedule shows this breakdown for every payment throughout the loan's life.

Mortgage Amortization in the UAE

UAE mortgages typically have tenures of 15-25 years (maximum 25 years per Central Bank regulations, and borrower's age at maturity cannot exceed 65 for salaried or 70 for self-employed). Understanding your amortization schedule helps you plan prepayments to reduce total interest paid. Most UAE banks provide an amortization schedule with your Final Offer Letter.

Worked Example

AED 1,500,000 mortgage at 4.5% over 25 years. Month 1 payment: AED 8,335 (AED 5,625 interest + AED 2,710 principal). Month 150 (year 12.5): AED 8,335 (AED 3,800 interest + AED 4,535 principal). Month 300 (year 25): AED 8,335 (AED 31 interest + AED 8,304 principal). Total interest over 25 years: AED 1,000,500.