Finance
In an amortizing mortgage, each monthly payment consists of:
APrincipal only
BInterest only
CPrincipal and interest✓ Correct
DPrincipal, interest, taxes, and insurance
Explanation
In a fully amortizing mortgage, each payment consists of both principal and interest. Early payments are mostly interest; later payments are mostly principal as the balance decreases.
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Key Terms to Know
Comparable Sales (Comps)
Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
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