Declining Interest Rate Loan - Posted by Erro Nijjer
Posted by Erro Nijjer on June 01, 2007 at 17:19:26:
I was wondering if any one could tell me exactly how are the payments calculated for a declining interest rate loan? Specifically I am looking at a 30 year loan for 307,500 with an interest rate starting at 8.875% and declining 0.5% every 5 years. I would expect the initial payment to be 2446.61 but the finance company is saying 2475.84. I tried looking on the web on how to calculate this but couldn’t find anything. Also how do they determine how much of each payment goes to the principle and how much goes to interest. From looking at the ammortization schedule they provided my the numbers bounce up and down. I would expect that the interest payment would slowly decrease but this is not the case with the files that they sent me. Thanks for your help.