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 statements are correct.

Question

Quizplus · Accepted Answer

The monthly payments for a 30-year mortgage typically remain fixed throughout the entire repayment period, so option A is incorrect. The amount of interest paid each month is based on the outstanding principal balance and the interest rate, so the dollar amount of interest expense paid each year will decrease as the principal balance decreases, making option B incorrect. However, as the borrower makes payments, the portion of each payment applied to the principal balance increases, while the portion applied to interest decreases, so the dollar amount of principal paid each month increases over time, making option C correct.

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