Finance
In a fully amortized 30-year mortgage, what happens to the ratio of principal to interest in each payment over time?
AThe interest portion grows and the principal portion shrinks
BThe payment always stays exactly 50/50 between principal and interest
CThe principal portion grows and the interest portion shrinks✓ Correct
DThe ratio stays constant throughout the loan term
Explanation
In a fully amortized mortgage, early payments are mostly interest. As the loan balance decreases over time, less interest accrues, so more of each payment goes toward principal. In the final years, payments are mostly principal.
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