You are looking at buying a piece of real estate and you intend to borrow as much as you possibly can from a bank to buy the property. The bank you are dealing with has a requirement that the LVR for their mortgages is no more 80% and based upon the value of the property that you wish to buy the bank will lend you $1,500,000. The loan that the bank will give you requires you to pay off the principal over a 30 year period. Interest is fixed at 8% per annum for the duration of the loan. The interest is compounded annually and a single annual repayment is required. The Credit Officer from the bank has given you the option of choosing either a Fully Amortising Mortgage or a Constant Amortising Mortgage. You intend to sell the property in 10 years time. You expect the annual capital growth of the value of property to be 12%.

Decide which type of amortising loan you will choose and show how much better off financially you will be, based upon this decision, when you sell the property in 10 years time. Include all of your calculations in your answer.