Finance
In Minnesota, which of the following best describes 'amortization' in a mortgage context?
AThe process of calculating the property tax on a home
BThe systematic reduction of a loan balance through regular payments of principal and interest over the loan term✓ Correct
CThe process of transferring a mortgage from one property to another
DThe method of determining a property's value for loan purposes
Explanation
Amortization is the process of paying off a loan through regular scheduled payments. Each payment includes interest (calculated on the outstanding balance) and principal (reducing the balance). In the early years of a 30-year mortgage, most of each payment is interest. Over time, as the balance decreases, more of each payment goes toward principal.
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