Which of the following statements regarding a 15-year (180-month) $125,000 fixed-rate mortgage is NOT correct? (Ignore all taxes and transaction costs.)
A)The remaining balance after 3 years will be $125,000 less the total amount of interest paid during the first 36 months.
B)Because it is a fixed-rate mortgage, the monthly loan payments (which include both interest and principal payments) are constant.
C)The proportion of the monthly payment that goes toward repayment of principal will be higher 10 years from now than it will be the first year.
D)The outstanding balance gets paid off at a faster rate in the later years of a loan's life.

Question

Quizplus · Accepted Answer

A) is incorrect because the remaining balance after 3 years is not simply $125,000 less the total amount of interest paid during the first 36 months. It is actually reduced by the amount of principal repaid, which is included in the fixed monthly payments along with the interest. The statement misunderstands how amortization works in a fixed-rate mortgage, where each payment contributes to both interest and principal repayment.

Which of the Following Statements Regarding a 15-Year (180-Month) $125,000