Finance
An Illinois mortgage has a 30-year term and a monthly payment of $1,432. Which statement accurately describes the amortization of this loan over time?
AThe principal and interest portions remain equal throughout the life of the loan
BIn the early years, most of the payment goes to interest; over time, more goes to principal reduction✓ Correct
CIn the early years, most of the payment goes to principal; later payments go mostly to interest
DThe monthly payment increases each year to keep up with inflation
Explanation
In a standard fully amortizing mortgage (constant payment), the monthly payment remains the same throughout the loan term, but the allocation between principal and interest changes over time. In the early years, most of the payment covers interest (on the large outstanding balance); as the principal decreases, less interest is charged and more of each payment reduces principal.
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