Which statement about mortgage payments is true?

• A. They do not affect home ownership.
• B. They only cover interest.
• C. They never include principal.
• D. They typically include principal and interest and can build equity.

Answer: (D)

Mortgage payments are made up of principal and interest, and paying both gradually increases your ownership stake in the home. The portion that goes toward principal reduces the outstanding loan balance, which builds equity—the part of the home you truly own. The portion that goes toward interest covers the cost of borrowing. Together, these payments typically form a monthly amount and can build equity over time. Sometimes payments also include amounts for taxes and insurance held in escrow, but the key idea is that principal and interest help you own more of the home as you pay. That’s why this statement is true: it reflects how mortgage payments function and how they contribute to equity.