What does annuity amortization provide in terms of payment structure?

Annuity amortization provides equal payments over time, which is a fundamental characteristic of how annuities function. In this structure, the borrower makes consistent payments that cover both interest and principal throughout the life of the loan. This allows for predictability in budgeting and financial planning, as the payment amount remains the same for each period, simplifying the repayment process for borrowers.

The equal payment structure contrasts with other amortization methods, where payments may not be constant or where the allocation between principal and interest can vary significantly over time. In annuity amortization, each payment contributes to reducing the principal amount as well as covering interest charges, leading to a decreasing interest burden over the life of the loan due to the declining principal. This predictability and stability in payments is one of the reasons why many borrowers prefer this method for loans.