FinanceQuestion 74 of 100
In a fully amortized loan, over the life of the loan the portion of each payment going to interest:
a.Increases while principal decreases
b.Decreases while principal increases
c.Stays exactly the same
d.Is always zero
Explanation
In a fully amortized loan, early payments are mostly interest because the balance is high, and over time the interest portion shrinks while the principal portion grows. The total payment stays level in a fixed-rate loan. By the end, nearly all of each payment reduces principal.
Practice all 100 questions free — no signup required.
Related questions on this topic
- The loan-to-value (LTV) ratio is calculated as:
- Private mortgage insurance (PMI) is typically required on a conventional loan when the:
- An acceleration clause in a mortgage allows the lender to:
- A buyer pays 2 discount points on a $200,000 loan. How much do the points cost?
- A key purpose of the secondary mortgage market, including entities like Fannie Mae and Freddie Mac, is to:
- The Truth in Lending Act (Regulation Z) requires lenders to disclose the:
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against New York Real Estate Salesperson Licensing Exam · How we review