Question

For normal interest rates (i.e., greater than zero), roughly how much of the original balance of an amortizing mortgage is paid off after half of the payments have been made?

a. Less than half
b. None of it, that is what it means to be an amortizing loan
c. More than half if rates are low, less than half if rates are high
d. More than half
e. About half

Answer 1

Roughly more than half of the original balance of an amortizing mortgage is paid off after half of the payments have been made.

Step-by-step explanation:

In an amortizing mortgage, the balance is gradually paid off over time through regular payments. After half of the payments have been made, roughly more than half of the original balance would be paid off.

For example, if you have a $200,000 mortgage and you make 360 monthly payments, after 180 payments (half of the payments), you would have paid off more than $100,000 of the original balance.

This is because each payment is divided into both the principal (the original balance) and the interest. With each payment, a larger portion goes towards the principal, gradually reducing the balance over time.