Amortization is the reduction of a loan balance over time through scheduled payments. For a level-pay fixed-rate mortgage, payments are equal and pay off principal and interest over a fixed term. Balloon loans, common in commercial lending, leave a remaining balance due at the end of the amortization period. Amortization also applies to premiums, dealer reserves and origination costs or upfront fees, which accountants can amortize or accrete over the life of an asset.