I have a 4% loan that spans 20 years, where I pay a fixed amount every three months.
If I make an extra payment, I then can choose between two options
- keep the duration of the loan constant, and I pay less every 3 months
or
- the duration of the loan is shortened and I pay the same amount every 3 months that I always have.
Question
How do I calculate which option that is the over all cheapest?