What is amortization and how does it work?

Amortization is the sum total of the principal amount and the interest amount, divided over the tenure of the loan. Each month, for a set number of years, you pay off part of the loan principal and part of the interest at different amounts — but the total payment stays equal every period. When it comes to housing loans, your monthly payment remains the same, while the parts that make up that payment change as time passes.

The two parts of every payment

Every monthly home loan amortization is made up of two things:

• Principal — the actual amount you borrowed from the bank to buy your property.
• Interest — the cost the bank charges for lending you that money, calculated on your outstanding balance.

Amortization simply takes those two amounts and spreads them across the whole loan term so that you pay the same fixed figure each month, all the way to the end of the tenure.

Why the same payment changes inside

This is the part that surprises most first-time borrowers. Your total monthly payment is fixed — but the split between principal and interest shifts every single month:

• In the early years, your outstanding balance is at its highest, so most of each payment goes towards interest and only a small slice reduces the principal.
• As the years pass, the balance falls, so less of your payment is interest and more of it goes towards paying down the principal.
• By the final years, almost all of your payment is reducing the principal, until the loan is fully paid off at the end of the tenure.

What decides your monthly amortization

Three numbers determine how big your monthly amortization will be:

• The loan amount (principal) — the bigger the loan, the higher the payment.
• The interest rate — a lower rate means less interest, and a smaller monthly payment.
• The loan tenure — the number of years you spread the loan over. A longer tenure lowers each monthly payment, but means you pay interest for longer, so the total interest over the life of the loan is higher. A shorter tenure means higher monthly payments but less total interest.

You can estimate your own monthly amortization for different loan amounts, rates and tenures using Nook's loan calculators before you apply.

How Nook helps

Understanding amortization is one thing — finding the bank that gives you the lowest one is another. Nook is the Philippines' original and award-winning mortgage broker. Instead of approaching banks one at a time, you pre-qualify in about 3 minutes and Nook compares 20+ banks for you, then matches you to the lender most likely to approve you at the sharpest rate — which directly lowers your monthly amortization.

Nook is a full-service brokerage, not a self-serve platform. Once you're matched, a dedicated loan consultant runs your entire application for you — preparing and lodging the bank forms, gathering your documents, and handling every follow-up — so you never fill in bank applications or visit a branch. And it's 100% free: the bank pays Nook a commission once your loan is released, never you.