Finance
Amortization in a mortgage loan refers to:
AThe process of increasing the loan balance over time
BThe gradual repayment of principal over the loan term through scheduled payments✓ Correct
CThe penalty for paying off a loan early
DThe adjustment of the interest rate on an ARM loan
Explanation
Amortization is the process of gradually paying off the principal balance of a loan through regular payments that include both principal and interest. In the early years of the loan, most of each payment goes to interest; over time, a greater portion goes to principal as the balance decreases.
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