You just bought a new home and have a 30-year mortgage with monthly payments. Which statement regarding your mortgage is correct?
A) Your monthly payments will decrease over time.
B) The dollar amount of interest expense you pay each year will remain the same each year.
C) The dollar amount of principal paid increases each month.
D) All of these choices are correct.

Question

Quizplus · Accepted Answer

In a typical mortgage structure, the total monthly payment remains the same throughout the term, but the composition of the payment changes over time. Early in the term, a larger portion of each payment is applied toward interest. As the principal balance decreases, the interest expense decreases, and the portion of the payment applied to the principal increases. Therefore, the dollar amount of principal paid increases with each payment.

You Just Bought a New Home and Have a 30-Year