Which statement is true regarding mortgage payments early in the loan term?

Most mortgage payments early in the loan term are structured such that a larger portion of the payment goes toward interest rather than principal. This is due to how amortization works in fixed-rate mortgages. In the early stages of the loan, the unpaid principal balance is higher, leading to higher interest charges calculated on that balance. As the borrower makes payments, while the total payment amount remains the same, the allocation of that payment shifts over time.

Initially, the interest portion is more substantial, and as more payments are made, the principal amount reduces, resulting in a gradual increase in the portion of the payment that goes toward the principal. This means that during the early period of the mortgage, borrowers typically see a significant amount of their payments going toward paying interest rather than reducing the principal balance. Consequently, the correct understanding is that most of the payment goes toward interest in the initial years of the mortgage.