Differentiate between penultimate payment and final payment??

Penultimate payment refers to the second-to-last payment in a series of payments, while final payment refers to the last payment in a series of payments. The penultimate payment is made before the final payment, and once the final payment is made, the series of payments is complete.

Penultimate Payment

- The payment made before the final payment.
- It is usually larger than the final payment because it covers a longer period of time (typically the second-to-last month of the loan term).
- It includes the remaining balance on the loan, interest for the second-to-last month, and any applicable fees.

Final Payment

- The payment made after the penultimate payment.
- It is typically the smallest payment in the loan term because it only covers the remaining interest and any applicable fees.
- It finalizes the loan and brings it to a zero balance.

Key Differences:

- Timing: Penultimate payment comes before the final payment.
- Amount: Penultimate payment is typically larger than the final payment.
- Purpose: Penultimate payment reduces the loan balance, while the final payment finalizes the loan and brings it to a zero balance.

Example:

Suppose you have a 30-year mortgage with a remaining balance of $100,000.

- Penultimate payment (second-to-last month): $5,000 (includes $4,900 in interest and $100 in principal)
- Final payment (last month): $100 (includes $99 in interest and $1 in principal)