An Ohio borrower has a fixed-rate mortgage with an amortization schedule. In the early years of the loan, most of each monthly payment goes toward:
Correct Answer
D) Interest, with a small portion going to principal reduction
In a fully amortized fixed-rate mortgage, the early payments are predominantly interest with a small portion going to principal. As the loan matures, the proportion shifts so that later payments are predominantly principal with less interest. This is because interest is calculated on the remaining balance, which is highest in the early years.
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Related Topics & Key Terms
Key Terms:
Related Concepts
RESPA is a federal law that requires lenders to provide borrowers with information about settlement costs, prohibits kickbacks and referral fees, and limits escrow account deposits. It applies to federally related mortgage loans.
The secondary mortgage market is where existing mortgage loans are bought and sold between lenders, investors, and government-sponsored enterprises (GSEs) like Fannie Mae, Freddie Mac, and Ginnie Mae.
TILA is a federal law that requires lenders to disclose the true cost of credit to borrowers, including the annual percentage rate (APR), total finance charges, and loan terms. It is implemented by Regulation Z.
More Oh Financing Closing Questions
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In Ohio, the conveyance fee is paid at the time of:
- → In Ohio, property tax prorations at closing are typically calculated based on:
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