finance

fixed-rate mortgage

A mortgage in which the interest rate stays the same for the entire life of the loan, so the principal and interest payment does not change. Common terms are 15 and 30 years. Early payments are mostly interest, and over time a greater share goes to principal. Total monthly payments may still change if taxes or insurance in an escrow account change.

Exam tip: In a fixed-rate fully amortized loan, the P&I payment is constant but the split shifts from mostly interest to mostly principal over time.
Example: A borrower takes a 30-year fixed-rate loan at 6.5%; her principal and interest payment is the same in year 1 and year 29.

1. In the early years of a fully amortizing fixed-rate mortgage, the largest portion of each monthly payment goes toward:

Answer & explanation

Answer: B. Early payments are mostly interest; as the balance declines, more of each payment goes to principal.

Related terms & state variants

adjustable-rate mortgage amortization schedule fully amortized loan principal and interest

Sources

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Last verified: 2026-10-23