On a 15-year fixed-rate mortgage with monthly payments, approximately what percentage of the total payments over the life of the loan consists of interest?
Correct Answer
A) About 25-30%
Due to the shorter amortization period of a 15-year mortgage, interest comprises a much smaller percentage of total payments compared to a 30-year loan. Typically, interest represents about 25-30% of total payments on a 15-year fixed-rate mortgage, while principal comprises 70-75%. This is significantly different from a 30-year mortgage where interest can represent 60% or more of total payments.
Why This Is the Correct Answer
Due to the shorter amortization period of a 15-year mortgage, interest comprises a much smaller percentage of total payments compared to a 30-year loan. Typically, interest represents about 25-30% of total payments on a 15-year fixed-rate mortgage, while principal comprises 70-75%. This is significantly different from a 30-year mortgage where interest can represent 60% or more of total payments.
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