Final answer:
Ron should make regular monthly payments calculated using the loan amount, interest rate, and term. Larger payments will result in faster payoff and interest savings. Additional annual payments reduce the loan principal faster, saving money over time.
Step-by-step explanation:
When considering the number of payments Ron should make on the repayment date, we need to calculate the monthly payments for a $300,000 loan with a 6% interest rate, compounded monthly, over 30 years. Using the provided formula, Ron's regular monthly payment would be R = $1,798.65. If Ron opts to make a larger payment by a fraction of 12, essentially making 13 payments a year, his monthly payment would increase to approximately $1,948.54, allowing him to pay off the loan more quickly and save on interest expenses.
For a $1,000,000 loan at the same rate and term, the monthly payment is $5,995.51. Over 30 years, this leads to a total of 360 payments and paying more than double the original loan amount.
The impact of making higher payments or additional payments per year is significant in reducing both the time to pay off the loan and the total interest paid. The additional payment each year speeds up the repayment process by reducing the principal balance faster, thus saving on interest that would otherwise accumulate over the lifetime of the loan. This principle is not only applicable to mortgages but to other loan types as well, including student loans and credit card debts.