Mortgage Amortization Quiz

What is mortgage amortization?

• A payment that reduces the loan balance by a fixed amount each month

• A payment that only covers the interest owed to the lender

• A payment that increases the loan balance over time

• A payment that pays off a loan over its term

How is the interest portion of a mortgage payment calculated?

• Based on the loan balance and the remaining term

• Based on the borrower's credit score

• Based on the lender's profit margin

• Based on the borrower's income

What happens to the principal portion of a mortgage payment over time?

• It fluctuates randomly

• It increases each month

• It decreases each month

• It stays the same throughout the loan term

How can borrowers speed up the mortgage amortization process?

• By refinancing the mortgage

• By extending the loan term

• By skipping mortgage payments

• By making extra payments towards the principal

What is the effect of making extra payments towards the principal?

• It extends the loan term

• It increases the interest expense

• It has no effect on the loan balance

• It reduces the loan balance and saves on interest

How much earlier can a loan be paid off by increasing the monthly payment by $10?

• 13 months

• 5 months

• 1 month

• 24 months

What is the guaranteed return on extra mortgage payments?

• Depends on the stock market

• Lower than the loan's interest rate

• Higher than the loan's interest rate

• Equal to the loan's interest rate

According to the video, why is paying down the loan balance a good idea?

• It allows for larger loan amounts in the future

• It has no effect on the loan term

• It reduces the interest expense

• It increases the loan balance

What is the main benefit of paying off a mortgage early?

• Qualifying for a larger loan

• Saving money on interest

• Increasing the credit score

• Avoiding foreclosure