How does the mortgage amortization process function?

The mortgage amortization process involves the gradual repayment of a loan through scheduled payments that include both principal and interest. Over the term of the mortgage, which is typically several years, these payments are structured in such a way that they cover both the interest accrued on the remaining loan balance and reduce the principal amount owed.

Initially, a larger portion of the payment goes toward interest, which decreases as the principal balance is paid down. Over time, more of each payment applies to the principal. This systematic reduction of the loan balance ensures that the loan is completely paid off by the end of its term, allowing the borrower to become the full owner of the property.

By understanding this process, borrowers can appreciate how each payment impacts their overall debt and the long-term financial commitment of their mortgage. This amortization schedule is crucial for effective financial planning, helping borrowers visualize how their debt decreases over time, making option C the most accurate representation of how mortgage amortization functions.