What is amortization?

Amortization refers to the process of gradually paying off a loan over a specified period through regular installments. Each payment typically consists of both principal and interest, allowing the borrower to systematically reduce the loan balance until it is fully repaid at the end of the term. This process is important in contexts such as mortgages and other types of loans, making financial planning more manageable for borrowers by providing a clear schedule and predictability in payment amounts.

In contrast, the other options relate to different concepts. Vacating a property without penalty involves considerations of lease agreements and tenant rights, which do not pertain to the financial mechanisms of loan repayment. Maximizing rental income over time deals with property management strategies and market dynamics rather than the repayment structure of loans. Lastly, determining property value based on current market conditions is an appraisal function, which focuses on assessing worth rather than the process of loan amortization.