What term describes a loan with a fixed monthly payment that includes both principal and interest?

The term that describes a loan with a fixed monthly payment that includes both principal and interest is a fully amortized loan. In this type of loan, borrowers make regular payments over the loan term, which are structured to gradually reduce the balance owed. Each payment consists of both principal repayment and interest, ensuring that by the end of the loan period, the entire principal and interest will be paid off.

This arrangement provides borrowers with predictability in their monthly budgeting since the payment amount remains constant over time. It contrasts with other types of loans where payments may fluctuate, such as adjustable-rate mortgages or loans that might require a balloon payment at the end of the term, where the full balance is due after a specified period. Thus, the fully amortized loan is fundamental in real estate financing for providing stability and clarity for borrowers.