Which statement is true regarding interest on mortgage loans?

Interest on mortgage loans is typically calculated based on the outstanding principal amount and is paid periodically as part of the mortgage payment. This interest is generally not prepaid; instead, it accrues over the life of the loan and is paid in installments according to the mortgage agreement.

When a borrower makes a monthly payment, for example, that payment usually consists of both principal and interest, with the interest component covering the cost of borrowing the money for that month. Prepayment of interest is not a standard practice in mortgage lending.

Other statements, such as that interest is always deferred, do not accurately reflect how interest is handled on mortgage loans. Similarly, while adjustable-rate mortgages can have interest rates that change, "often adjustable" does not apply universally to all mortgage loans and does not establish a fundamental characteristic of mortgage interest. Therefore, the statement that interest on mortgage loans is not prepaid is correct and accurately describes the common practice in mortgage agreements.