What term describes the repayment structure of a mortgage which includes both principal and interest?

The term that describes the repayment structure of a mortgage which includes both principal and interest is amortization. In an amortized mortgage, each payment made by the borrower covers both the interest due on the outstanding principal and a portion of the principal itself. This structure allows the mortgage balance to decrease over time, with the objective of fully paying off the loan by the end of its term.

During the initial stages of an amortized mortgage, a larger portion of the payment goes toward interest rather than principal, but as time progresses, the proportion of the payment applied toward the principal increases. This systematic allocation of payments contributes to the gradual reduction of the loan balance until it is entirely paid off.

The other repayment structures mentioned do not incorporate both principal and interest in this manner. Interest-only payments consist solely of paying the interest for a specified period, thereby not reducing the loan balance. Balloon payments require a large payment at the end of the loan term, often leaving a remaining principal balance that has not been reduced through regular payments. Deferred payments are characterized by a postponement of payment obligation rather than a structured repayment of both principal and interest. Therefore, amortization is the correct term for the described mortgage repayment structure.