15. Mortgage payments Mortgages, loans taken to purchase a property, involve regular payments at fixed intervals and are treated as reverse annuities. Mortgages are the reverse of annuities, because you get a lump-sum amount as a loan in the beginning, and then you make monthly payments to the lender. You've decided to buy a house that is valued at $1 million. You have $150,000 to use as a down payment on the house, and you are going to take out a mortgage for the rest. Your bank has approved you for a mortgage for the balance amount of $850,000 and is offering you a standard 30-year mortgage with a 8.50% fixed nominal interest rate (called the annual percentage rate, or APR). According to this proposal, you can expect to pay a monthly mortgage payment of rounded to the nearest whole dollar. (Note: If you comput a monthly interest rate, round the value to e six decimal places.) Your friends suggest that you take a 15-year mortgage, because a 30-year mortgage is too long, and you will lose a lot of money on interest. If your bank approves a 15-year, $850,000 loan at a fixed nominal interest rate of 8.50% (APR), the difference in the monthly payment of the 15-year mortgage and 30-year mortgages is 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 total interest will you pay over the life of the loan if you take out a 30-year mortgage instead of a 15-year mortgage? $846,360 $998,705 $1,083,341 $1,167,977