Find the costs of financing, Finance Basics

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Find the costs of financing for two schedules of monthly payments on a 25-year mortgage. The cash value of the house today is $500,000. You are paying monthly at a fixed rate of 6% per year compounded annually, and downpay 10% of the house value at start. At the end of this mortgage you plan to pay off the house completely. The first monthly payment is 1 month from start.

Schedule A: you ramp down the monthly payments so that they decrease with time, by 0.5% per month compounded monthly.
Schedule B: you keep the monthly payments equal.

 


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