Search this course Ch OS: Cengage Bonus - Time Value of Money 13. Mortgage payments Mortgages, loans taken to purchase a property involve regular payments at fed intervals and are treated as reverse annuities Mortgages are the reverse of annuities, because you get a lump sum amount as a fan 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 $100,000 to use as a down payment on the house, and want to take out a mortgage for the remainder of the purchase price. Your bank has approved your $900,000 mortgage, and is offering a standard 30-year mortgage at a 10% wed nominal interest rate (called the loan percentage rate APR). Under this loan proposal, your mortgage payment will be $9,072.35 per month (Note: Iound the final value of any interest rate used to four decimal places) Your friends suggest that you take a 15-year mortgage, beca 0-year mortgage is too long and you will pay a lot of money on interest. If your bank approves a 15-year, 1900,000 loan atfed nominaterest rate of 10% (APR), then the difference in the monthly payment of the 15 year mortgage and 30-year mortonge wat be Note: Hound the final value of any interest rate wed to four decimal place) 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 for fewer payments and will pay a lot less interest. How much more total interest will you pay over the life of the loan if you take out ta 30-year mortgave instead of a 15-year mortgage O $1,102,415.40 O $1,411,091,71 31,300,850.17 O $1,521.333.25 Which of the following statements is not true about mortgages? The payment allocated toward principal in an amortized loan is the residual balance - that is, the difference between total payment and the interest due Mortgages always have a fixed nominal interest rate Mortgages are examples of amortured loans The ending balance of an amortized loan contract will be zero