What is Accelerated Amortization?

Accelerated amortization is the recalculation of an amortization schedule, such as mortgage payments, after the borrower pays off some of the debt ahead of schedule.

Amortization describes the accounting practice of giving a one-time expense a retirement schedule or payment plan by which it is to be either deducted for tax purposes, repaid, or paid out. Accelerated amortizations allow for more payments or deductions in the early years rather than later years.

The most easily understood example is in terms of loan repayments. When a debt repayment is amortized, it is given a “life span,” and a borrower is able to repay it over a certain number of years. Interest payments are due along with the principal repayments. Long-term amortizations for large expenses like home mortgages have interest due that can add up to a significant amount over time.

Some borrowers would prefer to accelerate the debt repayment when they can afford to, and thereby avoid paying some of the interest due in the future. Not all loan contracts will allow acceleration or prepayment, and there are sometimes penalties or clauses in the loan agreement that prevent it.

In terms of bonds.