5. 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 $250,000 to use as a deposit on the house, and you take out a mortgage for the rest. Your bank has approved your mortgage for the balance amount of $750,000 and is offering you a standard 30-year mortgage with 10% fixed stated interest rate (called the APR, or Annual Percentage Rate). According to this proposal, what will be your monthly mortgage payment? $10,201.43 O $8,226.96 O $8,885.12 $6,581.57 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, $750,000 loan at a fixed stated interest rate of 10% (APR), what will be the difference in the payments of the 15-year mortgage and 30-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 30-year mortgage instead of a 15-year mortgage? Which of the following statements is not true about mortgages? The ending balance of an amortised loan contract will be zero. Mortgages are examples of amortised loans O The payment allocated towards principal in an amortised loan is the residual balance-that is, the difference between total payment and the interest due. O Mortgages always have a fixed stated interest rate