Question

5. You have a loan for $150,000 at 5% on a 30-year mortgage. You plan to pay off your loan in 10 years. Do you want your loan to be figured using the Rule of 78 or the Unpaid Principle Balance Rule?

Answer 1

The best choice in here is the Unpaid principle balance rule. We know this because the other rule automatically calculates the interest up front, and the complete payment includes the interest + principle for 30 years. This does not happen with the Unpaid principle balance rule where as you pay down the principle early which is in 10 years and not in 30, the interest gets smaller and smaller.