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Purchase of a new home The Does have qualified for a mortgage of $500,000 to be amortized over 25 years. Their mortgage broker has offered

Purchase of a new home

The Does have qualified for a mortgage of $500,000 to be amortized over 25 years. Their mortgage broker has offered them the following options:

a. A 5 year fixed rate with monthly payments at an annual interest rate of prime+1%

b. A 10 year fixed rate with biweekly payments at an annual interest rate of prime+2%

Prime is currently at 1.5% and projected to increase by 0.25% every year for the next 10 years.

Which Mortgage terms should they accept given that their goal is to pay as much principle as possible over the next 10 years?

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