Legal Definitions - self-liquidating mortgage

A self-liquidating mortgage is a type of amortized mortgage where the borrower pays both the interest and a portion of the principal in each periodic payment. By the end of the mortgage term, the borrower will have completely repaid the loan. This type of mortgage is also known as an amortized mortgage.

For example, if a borrower takes out a 30-year self-liquidating mortgage for $200,000 at a fixed interest rate of 4%, their monthly payments will be calculated to pay off the loan by the end of the term. Each payment will include a portion of the principal and interest, with the amount of interest decreasing as the principal is paid down.

This type of mortgage is beneficial for borrowers who want to ensure that they will completely pay off their loan by the end of the term. It also allows borrowers to build equity in their home over time.