Financing
What Is Amortization?
Amortization is the schedule of regular payments that pays a loan down to zero over time, with each payment covering interest plus a bit of principal.
Commercial loans on RV parks and mobile home parks often amortize over 20 to 25 years, which sets the payment. Crucially, the amortization is not the same as the loan term: a loan can amortize over 25 years but come due, or balloon, in 5, 7, or 10. A longer amortization lowers the annual debt service, which raises DSCR and lets the property carry more debt, at the cost of more total interest.
See the payment and balance on the commercial mortgage calculator.
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Related terms
Part of the RVP Underwriter glossary of income-property underwriting terms. Browse all definitions, or put them to work with the free calculators.