Is amortization the same as PITI on the NJ exam?

No. Amortization splits a P&I payment into interest and principal. PITI adds monthly taxes and insurance on top of P&I ([PSI bulletin](https://test-takers.psiexams.com/api/content/bulletin/1667); see also [exam math](https://businesselementary.com/nj-real-estate-exam-math)).

What formula gives the first month's mortgage interest?

Monthly interest = current loan balance × annual interest rate ÷ 12. Example: $200,000 at 6% → $1,000 interest for month one.

Does an interest-only payment reduce the loan balance?

Not during the interest-only period. The payment covers interest; principal stays the same until amortized payments begin ([PSI outline: interest-only loans](https://test-takers.psiexams.com/api/content/bulletin/1667)).

What is a balloon payment in exam language?

A large principal balance due before a fully amortized schedule would have paid the loan off—typical of a partially amortized loan ([PSI bulletin](https://test-takers.psiexams.com/api/content/bulletin/1667)).

Will the NJ exam make me build a full 30-year amortization table?

Unlikely. Expect one- or two-month interest and principal calculations, plus definitions that separate amortized, balloon and interest-only structures.

Amortization and Interest Math on the NJ Real Estate Exam

The short answer: On the New Jersey salesperson exam, amortization questions ask you to split a mortgage payment into interest and principal for a given month. Monthly interest is the current balance times the annual rate divided by 12. Subtract that interest from the payment to find principal reduction; subtract the principal from the balance for the new loan amount. Financing is 10% of the general outline, and the outline expressly lists amortized, partially amortized (balloon) and interest-only loans (PSI Candidate Information Bulletin, updated 2/1/2026).

This page drills the month-by-month math. Closing-cost and PITI setups stay on real estate math for the NJ exam. Loan types and lending laws are covered in financing on the NJ exam.

What does "amortization" mean on the exam?

Amortization means paying off a loan with regular payments so the amount owed goes down over time. Each scheduled payment covers that month's interest first; anything left reduces principal. The Consumer Financial Protection Bureau describes amortization that way and contrasts it with negative amortization, where the payment is too small to cover interest and the balance rises (CFPB Ask CFPB).

Exam writers almost always give you a starting principal, an annual interest rate and a fixed monthly principal-and-interest (P&I) payment. Taxes and insurance are not part of the amortization split unless the question mixes in PITI.

How do you calculate the first month's interest and principal?

Use this sequence:

Monthly interest = loan balance × annual rate ÷ 12
Principal reduction = monthly P&I payment − monthly interest
New balance = old balance − principal reduction

Worked example (made-up exam figures):
Loan balance $240,000 · annual rate 6% · monthly P&I $1,438.92

Monthly interest = $240,000 × 0.06 ÷ 12 = $1,200.00
Principal reduction = $1,438.92 − $1,200.00 = $238.92
New balance = $240,000 − $238.92 = $239,761.08

Second-month interest would use $239,761.08 × 0.06 ÷ 12—not the original $240,000. That declining-interest pattern is the heart of a fully amortized loan.

How do amortized, balloon and interest-only loans differ?

PSI groups them under Financing → Types of Loans (PSI bulletin):

Loan type	What the payment does	Exam trap
Fully amortized	Over the full term, payments retire interest and all principal	Early payments are mostly interest
Partially amortized (balloon)	Regular payments based on a long amortization schedule, but a large balloon principal is due earlier	Do not assume the loan is paid off when the payment stream ends
Interest-only (for a period)	Payment covers interest only; principal stays the same during that phase	There is no principal reduction until amortization begins

Negative amortization is the risky cousin: unpaid interest is added to principal, so the balance grows (CFPB).

How is this different from PITI math?

PITI estimates the full housing payment: Principal & Interest + Taxes/12 + Insurance/12. That skill is listed under Real Estate Calculations on the PSI outline and is taught on our exam math page.

Amortization questions zoom in on the P&I line only. If a stem gives annual taxes or insurance, ask whether the question wants PITI or the interest/principal split. Mixing them is a common miss.

What shortcuts keep you from losing easy points?

Convert the annual rate to a decimal before dividing by 12 (6% → 0.06)
Use the current balance for each month's interest
If the payment is smaller than that month's interest, the loan is not amortizing that month (interest-only or negative amortization territory)
Round only when the question tells you how; many stems use clean numbers
Scratch paper is allowed at PSI centers; remote rules differ—check the current bulletin

For outline pacing, pair this page with the PSI content-outline study checklist and how to use practice exams. Area and acreage setups are on a separate drill: area and acreage math.

Timed practice helps more than rereading formulas. Business Elementary's practice exams can surface weak spots; if you still need the pre-licensing hours, see the 75-hour course.

How should you practice amortization questions?

Work three patterns until they feel automatic:

First-month split from balance, rate and payment
Second-month interest using the reduced balance
Identify the loan type from a short description (fully amortized vs balloon vs interest-only)

Then mix them with the financing definitions on financing for the NJ exam and the formula sheet on exam math. If a practice stem mentions "points" or LTV, that is usually a different calculation—not amortization—even though it sits in the same Financing bucket on the outline (PSI bulletin).

Sources

PSI New Jersey Real Estate Candidate Information Bulletin (updated 2/1/2026): https://test-takers.psiexams.com/api/content/bulletin/1667
CFPB Ask CFPB, amortization / negative amortization: https://www.consumerfinance.gov/ask-cfpb/what-is-amortization-en-103/

Last reviewed: November 6, 2026