What does amortize mean?
Amortize is a verb used chiefly in finance and accounting to describe the gradual reduction of an obligation or cost over time. In its most familiar sense, it refers to paying off a loan — such as a mortgage — through scheduled payments that cover both interest and principal, so that the debt steadily shrinks until it is fully repaid. In accounting, the word takes on a second meaning: spreading the cost of an intangible asset, like a patent, trademark, or goodwill, across the periods that benefit from it, rather than expensing it all at once. The term derives from the Latin phrase 'ad mortem', meaning 'to death', which is why early writers described amortization as 'killing' a debt payment by payment. It is closely related to depreciation, though depreciation applies to physical assets while amortization applies to debts and intangibles. Because so much of modern financial life — home loans, business acquisitions, corporate earnings — depends on spreading costs over time, amortize is an essential word for anyone reading a loan agreement or a balance sheet.
verbTo gradually reduce a debt or the cost of an intangible asset over a fixed period through regular payments or accounting charges.
- To extinguish a debt gradually by making regular payments of principal and interest over a set period.
- In accounting, to write off the cost of an intangible asset (such as a patent, copyright, or goodwill) incrementally over its useful life.
"The company amortizes the cost of its patents over fifteen years."
"Her thirty-year mortgage is structured so that each monthly payment amortizes a little more of the principal."
"The startup chose to amortize its acquisition costs over five years to smooth out their impact on earnings."
The word 'amortize' literally means 'to kill' — it comes from Latin 'ad mortem', because each payment slowly puts a debt to death.
Reviewed by Deb Chak, Editor. AI-assisted content curated by RJS Tech Solutions LLP.
Etymology of amortize
Amortize traces back to the Latin phrase 'ad mortem' ('to death'), which passed into Old French as the verb 'amortir', meaning to bring something to an end or deaden it. Middle English adopted the term in the form 'amortisen' around the fourteenth century, initially in legal and financial contexts concerning the transfer of property to a corporation or the extinguishing of obligations. The modern sense of gradually reducing a debt through periodic payments developed alongside compound-interest lending practices in later centuries. The word shares its Latin root 'mors' (death) with cognates such as 'mortal', 'immortal', 'mortgage', and 'mortuary'.
Related word forms
How amortize is actually used
Amortize is primarily a technical term used in finance, banking, and accounting; it appears in formal and business contexts rather than everyday conversation. British usage often prefers the spelling 'amortise' while American English uses 'amortize'.
Easily confused with amortize
Depreciation spreads the cost of tangible assets like machinery over time, while amortization applies to debts and intangible assets such as patents and goodwill.