Finance
In Texas, a borrower can reduce their mortgage payment by making extra principal payments. This strategy is beneficial primarily because:
AIt earns interest income for the borrower
BIt reduces the outstanding principal balance, reducing future interest charges and shortening the loan term✓ Correct
CIt increases the tax deductibility of the mortgage
DIt guarantees a future refinance at a lower rate
Explanation
Extra principal payments reduce the outstanding loan balance, which reduces the interest charged on subsequent payments. This builds equity faster, shortens the loan term, and reduces total interest paid over the life of the loan.
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