Answer: The answer is (a). At the beginning of your loan, your payments are covering mostly interest. At the end of your loan, your payments are covering mostly principal.
Step-by-step explanation: We are to choose one of the given four options that is most accurate regarding mortgage payments through the life of our loan. The mortgage payment is a combination of interest and principal repayment. Over the life of the mortgage, the ratio of the interest to the principal remain changing.
Initially, our payment will be mostly interest, with inclusion of small amount of principal. As the times passes, the principal portion of the payment goes on increasing and the interest portion goes on decreasing, because the percentage of interest is calculated on the basis of current outstanding balance of the mortgage.
Thus, the correct option is (a).
