What term describes the process of paying down a mortgage over the loan's term?

Amortization is the correct term that refers to the process of paying down a mortgage over the duration of the loan. Specifically, it involves making regular payments that cover both the principal amount borrowed and the interest charged on the loan. Over time, as these payments are made, the proportion of each payment that goes towards the principal increases while the interest component decreases, resulting in gradual reduction of the outstanding balance.

This concept is fundamental in mortgage lending, as it defines how the loan is structured and how much of the loan will be paid off over time. Understanding amortization helps borrowers grasp the long-term financial commitment involved in taking a mortgage and aids in budgeting for these payments.

The other terms mentioned do not accurately represent this specific process. Reduction generally relates to a decrease in payments or balance but lacks the specific context of structured loan pay down. Refinancing involves replacing an existing loan with a new one typically to secure better terms, and equity building signifies the increase in ownership interest in the property as the mortgage balance is paid down, rather than the payment process itself.