What does an amortization schedule show for each scheduled payment?
Correct Answer
A) The allocation between principal and interest and the remaining balance
Why this is correct: An amortization schedule is a table detailing each periodic payment on an amortizing loan. For each payment, it shows the split between the amount applied to interest and the amount applied to principal. It also shows the remaining principal balance after that payment is applied, illustrating the loan's payoff progress over time. Why the other choices are wrong: The choice "Only changes in property value" is incorrect; property value is unrelated to the loan's amortization math. The choice "Only escrow shortages" is incorrect; escrow account status is separate from the P&I amortization schedule. The choice "The borrower's future credit score" is incorrect; credit scores are not part of a loan's payment schedule. Exam tip: The amortization schedule is purely about the loan's principal and interest. It does not include or track escrow, insurance, taxes, or property value.
Why This Is the Correct Answer
Why this is correct: An amortization schedule is a table detailing each periodic payment on an amortizing loan. For each payment, it shows the split between the amount applied to interest and the amount applied to principal. It also shows the remaining principal balance after that payment is applied, illustrating the loan's payoff progress over time. Why the other choices are wrong: The choice "Only changes in property value" is incorrect; property value is unrelated to the loan's amortization math. The choice "Only escrow shortages" is incorrect; escrow account status is separate from the P&I amortization schedule. The choice "The borrower's future credit score" is incorrect; credit scores are not part of a loan's payment schedule. Exam tip: The amortization schedule is purely about the loan's principal and interest. It does not include or track escrow, insurance, taxes, or property value.
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