Business and Personal Finance Dictionary

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• DIRECT REDUCTION MORTGAGE
  
  a type of mortgage in which at least a portion of each payment is applied directly to reduce the amount of outstanding principal. The interest is computed each month on the remaining principal balance. Therefore, each month the amount of interest due is reduced as the loan is repaid. In direct reduction mortgages with equal monthly payments, the portion of the fixed payment applied to principal increases each month as the interest portion decreases.
  
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