Homer has decided to purchase a house. The price of the house is $80,000 after a down payment of $20,000. The bank will finance the purchase for 25 years at 9%. Alternatively, it will finance the house for 15 years at 8%. Under either option, the bank wants Homer to retire the loan by making a series of equal-sized year-end payments.

Required
Evaluate the options for Homer. Write a memo to Homer (in good form) that explains how much total interest he will pay under each option and how much his total payments will be each year and over the life of the loan. Advise Homer about which choice he should take and the factors that are important in making the decision.