Your “amortization” is the distribution of loan repayments into a series of cash flow installments. Each repayment pays a portion of both your principal balance and your accrued interest.

When you obtain a commercial mortgage, all of your repayment details are set out in an amortization schedule (which is the schedule of loan payments over the life of the loan). Your amortization schedule factors in the amount of principal and the amount of interest that comprise each payment until your commercial loan is paid off at the end of the loan term.

In some instances, the loan terms and amortization schedule cover the same time period – allowing you to pay off the mortgage with your last repayment. Unlike residential mortgages, however, commercial loans often have an amortization period that is longer than the term of the loan.

With a longer amortization period, borrowers make repayments during the loan term that reflect the payment amount as if the loan were to be paid off over the entire length of the amortization period. For that reason, when a commercial mortgage has an amortization period that extends beyond the loan term, the loan is paid off with a final balloon payment.