Finance
An amortization schedule for a Texas mortgage shows the allocation of each payment between principal and interest. In an early payment, the interest component is larger because:
AThe interest rate increases early in the loan
BThe outstanding principal balance is highest at the beginning, generating the most interest✓ Correct
CThe lender collects front-loaded fees
DTexas law requires front-loaded interest
Explanation
Interest is calculated on the remaining principal balance. When the balance is highest (early in the loan), more of each payment goes to interest. As principal decreases over time, less interest accrues and more of each payment reduces principal.
Related Texas Finance Questions
- Texas law regulates 'prepayment penalties' on home loans. For home equity loans under Texas Constitution Article XVI, prepayment penalties are:
- In Texas, the usury laws set maximum interest rates on loans. For most consumer loans, the maximum rate is governed by:
- A Texas FHA loan requires both an upfront mortgage insurance premium (UFMIP) and an annual mortgage insurance premium (MIP). Currently, the UFMIP is approximately:
- Under a Texas deed of trust, foreclosure is typically handled as a:
- Under Texas law, a lender who fails to release a paid-off deed of trust lien within the required timeframe can be subject to:
- Under the Dodd-Frank Act, a Qualified Mortgage (QM) generally prohibits:
- A Texas conventional conforming loan must stay within the loan limits set by:
- Under the Dodd-Frank Act, a seller who provides financing for more than three properties per year in Texas must comply with:
Practice More Texas Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Texas Quiz →