You have a 15-year, fixed-rate, $150,000 mortgage. The monthly payment amount is constant and the mortgage is amortized on a monthly basis. Which of the following best describes how much the principal balance will be after the 90th payment has been made?

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Quizplus · Accepted Answer

In an amortized loan, the monthly payment is constant, but the portion of the payment that goes towards interest decreases over time, while the portion that goes towards the principal increases. After 90 payments (7.5 years into a 15-year mortgage), you would have paid off more than half of the interest but less than half of the principal due to the way amortization schedules work. Therefore, the principal balance after the 90th payment would be more than $75,000 but less than the original loan amount.

You Have a 15-Year, Fixed-Rate, $150,000 Mortgage