Could you help me out on what the reducing balance is, or how it is calculated? I can do simple maths but I haven't a financial bone in my body. I don't even understand your acronyms (IRR, CAGR?).The return on L is by reference to the change in the original cashflow which is over N years. The IRR gives the return over N years albeit it is only enjoyed compoundly on the whole L for Na years and then on a reducing balance from Na to N years.
All changes to the cashflow on a mortgage are at an IRR equal to the mortgage rate. All that is at issue is for how much and for how long does the IRR compound.