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12. Mortgage payments Aa Aa Mortgages and other amortized loans (meaning equal or blended payments) involve regular payments at fixed intervals. These are sometimes called reverse annuities, because you get a lump-sum amount as a loan in the beginning, and then you make the periodic payments (usually monthly or more frequently, depending on the agreement) to the lender. You've decided to buy a house that is valued at $1 million. You have $300,000 to use as a down payment on the house, and you take out a mortgage for the rest. Your bank has approved your mortgage for the balance amount of $700,000 and is offering you a 25-year mortgage with 8% fixed nominal interest rate (called the APR, or Annual Percentage Rate) compounded semi-annually. According to this proposal, what will be your monthly mortgage payment? O $7,212 O $8,280 O $5,342 O $6,678 Your friends suggest that you take a 15-year mortgage, because a 25-year mortgage is too long and you will lose a lot of money on interest. If your bank approves a 15-year, $700,000 loan at a fixed nominal interest rate of 8% (APR), what will be the difference in the payments of the 15-year mortgage and 25-year mortgage? It is likely that you won't like the prospect of paying more money each month, but if you do take out a 15-year mortgage, you will make far fewer payments and will pay a lot less in interest. How much more interest will you pay if you take out a 25-year mortgage instead of a 15-year mortgage

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