In paying off a mortgage loan, the amount of the periodic payment that goes toward the reduction of principal ?

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In paying off a mortgage loan, the amount of the periodic payment that goes toward the reduction of principal increases over the life of the mortgage.
a) False
b)True

3 Comments
  1. Reply
    Joel K
    January 20, 2011 at 3:32 am

    Ture for sure

  2. Reply
    donfletcheryh
    January 20, 2011 at 3:55 am

    True, but not necessarily so. A mortgage loan can be interest -only so that the principal repayment remains zero. This strategy is often used where interest payments are used to compute permitted rentals in rent controlled housing.

  3. Reply
    MJ
    January 20, 2011 at 4:52 am

    What, one of your basic econ or finance homework questions? Actually, it depends upon the type of mortgage you have. There are fixed rate loans, where the reduction in principal WILL increase over life of loan. There are negative amortization loans, where the principal due will actually INCREASE over time instead of reduce. And there are interest only loans or other loans where the amount of principal reduction depends upon the principal payments made by the borrower over time, under the terms of the mortgage.

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