You are considering two payment options on a $700,000 25-year mortgage having an interest rate of 4% compounded monthly. The first option is to make monthly payments at the start of each month, while the second option is to make payments at the end of each month. How much interest will be saved by choosing the first option?

Question

Quizplus · Accepted Answer

By making payments at the start of each month, you reduce the principal balance earlier, which results in less interest accruing over the life of the loan. The interest saved by choosing the first option is $3,683.

You Are Considering Two Payment Options on a $700,000 25-Year