Financial Knowledge Assessment: Q2A
2. True or False: A 15-year mortgage typically requires a higher monthly payment than a 30-year mortgage, but the total interest over the life of the loan will be less.
Explanation: The correct answer is “True.” The biggest takeaway here is that a smaller monthly payment does not mean that you will pay less, in total. The examples of the 15 and 30 year mortgage in this question demonstrate this idea: Though the monthly payment for a 15 year mortgage is higher, the total amount paid over the life of the mortgage is much higher in the typical 30 year plan. It is important recognize this distinction, as the total amount paid in a mortgage or other loan could have significant consequences years down the road.
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