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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
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 exist1 million. You have exist350,000 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 exist650,000 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? exist6, 201 exist7, 690 exist6, 697 exist4, 961 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, exist650,000 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? Which of the following statements is not true about mortgages? Mortgages always have a fixed nominal interest rate. The payment allocated toward principal in an amortized loan is the residual balance-that is, the difference between total payment and the interest due. The ending balance of an amortized loan contract will be zero. Mortgages are examples of amortized loans
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