When Julies and Patty Bakery were house hunting 5 years ago, the mortgage rates were pretty high. The fixed rate on a 30-year mortgage was 4.00% while the 15-year fixed rate was at 4.75%. After walking in and out through many homes, they finally reached a consensus and decided to buy a $150,000 two-story house in an up and coming suburban neighborhood in the East Area. To avoid prepaid mortgage insurance (PMI), they had to borrow from family members and come with 20% down payment and the additional required closing costs.

Since Julie and Patty Bakery had already accumulated significant credit card debt and were still paying off their colleges loans, they decided to opt for lower 30-year mortgage payments, despite its higher interest rates.

1. What is Julie and Pattys monthly mortgage payment under 30-year mortgage? What is the total interest paid over 30-years period?
2. Had the couple opted for the 15-year mortgage, how much higher would their monthly payment be? What are the monthly payment and total interest paid over 15-years period?
3. What can you conclude regarding the 30-year mortgage vs. 15- year mortgage? Compare the monthly payment and total interest paid for 30-year mortgage vs. 15-year mortgage?