### What is amortization with respect to a mortgage? - [ ] The process of interest compounding over time - [x] The schedule used to determine monthly loan payments - [ ] The act of paying off a mortgage faster than scheduled - [ ] The initial down payment required for a mortgage > **Explanation:** Amortization, in the context of a mortgage, refers to the schedule determining your monthly loan payments. The schedule outlines how each payment is divided between principal and interest over the loan's lifetime. ### What does an amortization schedule specify? - [ ] Only the monthly principal payment - [ ] Only the monthly interest payment - [x] The monthly division of both principal and interest - [ ] The borrower's credit score improvements > **Explanation:** An amortization schedule specifies the monthly division of both principal and interest for the duration of the loan, helping borrowers understand how their payments are applied over time. ### What should you check with your lender concerning your mortgage amortization schedule? - [ ] If your payments can be increased periodically - [ ] If you can switch to a fixed interest rate - [x] If there is a penalty for early repayment - [ ] If the schedule can be changed midway > **Explanation:** It is crucial to check with your lender if there is any penalty for paying your mortgage off early. This information can help you plan and potentially save on interest payments by paying ahead of schedule if no penalty exists. ### Why might a borrower prefer a 15-year mortgage over a 30-year mortgage? - [ ] Because it has higher monthly payments - [ ] Because it is easier to qualify for - [x] Because it costs less in interest overall - [ ] Because it has more flexible payment options > **Explanation:** A borrower might prefer a 15-year mortgage over a 30-year mortgage because it costs less in interest overall. Shorter loan terms typically result in higher monthly payments but significantly lower total interest costs. ### What happens to the total interest paid on a loan if you choose a 30-year mortgage over a 15-year mortgage? - [ ] It remains the same - [x] It increases - [ ] It decreases - [ ] It fluctuates widely > **Explanation:** Choosing a 30-year mortgage over a 15-year mortgage results in an increase in total interest paid over the life of the loan because the interest accumulates over a longer period. ### Why is an amortization schedule useful for borrowers? - [ ] It helps determine credit score improvements - [x] It shows how payments are divided and helps in planning - [ ] It sets up automatic payments - [ ] It provides tax deductible information > **Explanation:** An amortization schedule is useful because it shows how each payment is divided between principal and interest, helping borrowers in planning and understanding the progress of paying off their loan. ### What does a typical monthly mortgage payment consist of according to an amortization schedule? - [ ] Taxes and insurance only - [x] Both principal and interest - [ ] Interest only - [ ] Principal only > **Explanation:** A typical monthly mortgage payment according to an amortization schedule consists of both principal and interest. This division helps gradually reduce the loan's outstanding balance. ### How can you reduce the total interest paid on an amortized mortgage? - [ ] By extending the loan term - [ ] By switching to an interest-only loan - [x] By paying ahead of schedule - [ ] By not paying property taxes > **Explanation:** You can reduce the total interest paid on an amortized mortgage by paying ahead of schedule, reducing the principal balance faster and, consequently, the amount of interest generated over time. ### What impact does early repayment have on an amortized loan if there's no prepayment penalty? - [ ] It increases the loan term - [ ] It does not affect the interest payment - [x] It reduces the total interest paid - [ ] It requires additional documentation > **Explanation:** If there is no prepayment penalty, early repayment of an amortized loan reduces the total interest paid, as the principal balance decreases faster than predetermined by the schedule. ### During the early years of a mortgage, what component does a larger portion of the monthly payment typically go towards? - [x] Interest - [ ] Principal - [ ] Taxes - [ ] Home owner's insurance > **Explanation:** During the early years of a mortgage, a larger portion of the monthly payment typically goes towards interest rather than principal, as stipulated by the amortization schedule.