A fully amortizing fixed-rate payment is $1,500. The interest due for the month is $1,100, and there are no fees or escrow items in that payment. How much reduces principal?
Correct Answer
D) $400
Why this is correct: In a fully amortizing payment, the portion applied to principal is the total P&I payment minus the interest due for that period. Calculation: $1,500 (total P&I payment) - $1,100 (interest due) = $400 applied to principal reduction. Why the other choices are wrong: "$1,100" is wrong; this is the interest portion, not the principal reduction. "$1,500" is wrong; this is the entire payment, not the amount reducing principal. "$2,600" is wrong; this incorrectly adds the payment and interest instead of subtracting. Exam tip: Principal reduction = Total P&I Payment - Accrued Interest. This is a fundamental amortization calculation.
Why This Is the Correct Answer
Why this is correct: In a fully amortizing payment, the portion applied to principal is the total P&I payment minus the interest due for that period. Calculation: $1,500 (total P&I payment) - $1,100 (interest due) = $400 applied to principal reduction. Why the other choices are wrong: "$1,100" is wrong; this is the interest portion, not the principal reduction. "$1,500" is wrong; this is the entire payment, not the amount reducing principal. "$2,600" is wrong; this incorrectly adds the payment and interest instead of subtracting. Exam tip: Principal reduction = Total P&I Payment - Accrued Interest. This is a fundamental amortization calculation.
More Mortgage Knowledge Questions
In a closing-readiness check, a risk reviewer sees facts tied to TILA Truth in Advertising. What should the file reflect?
In a training scenario, a trainee asks which official source controls FHA single-family origination policy. What action best follows the rule?
A compliance analyst compares the file facts with LTV Ratio Calculation during a licensing team review. Which conclusion is accurate?
A branch manager asks about a loan file because a trainee asks which official source controls FHA single-family origination policy. What should happen?
The loan team compares the file facts with ARM Cap Structures during a borrower follow-up call. Which conclusion is accurate?
A borrower has a 30-year fixed-rate mortgage with monthly principal and interest of $1,450. Property taxes increase, and taxes are paid through escrow. What can happen to the total monthly payment?
A loan has an outstanding principal balance of $240,000 and a 6% annual interest rate. Using simple monthly accrual, how much interest accrues for one month?
An annual escrow analysis for a current borrower shows a $780 shortage. One month's escrow payment is $600. The servicer elects to require repayment over the shortest installment period permitted by Regulation X for this shortage. What schedule is permitted?
What does an amortization schedule show for each scheduled payment?
A monthly principal-and-interest payment is $1,800, of which $1,250 is interest. How much principal is paid that month?
People Also Study
Federal Mortgage-Related Laws
24% of exam
Mortgage Loan Origination Activities
27% of exam
Ethics, Fraud & Consumer Protection
18% of exam
Uniform State Test Content
11% of exam
Related Study Resources
Previous Question
A borrower requests cancellation of borrower-paid PMI after the HPA cancellation date has been reached. One mortgage payment was 35 days late eight months before this request. Does this history meet the HPA good-payment-history requirement for borrower-requested cancellation?
Next Question
A borrower's fixed monthly principal-and-interest payment is $1,600, and the escrow deposit is $450. What total amount is collected for the scheduled monthly payment?