4. In 2006 Juan and Maria purchased a home for $250,000. They were offered a 30-

Question

4. In 2006 Juan and Maria purchased a home for $250,000. They were offered a 30-year loan by a mortgage broker for no money down, interest only for the first three years at 3%, then automatically converting to an amortizing loan at 2 points above the prime rate (the prime rate is now 5%). What was their initial monthly payment, and what did it become after the reset? " PLEASE FOCUS ON THE WORDING THAT IS ASKING FOR THE BEFORE AND AFTER PAYMENT INFO AND ALSO ACTUALLY STATE WHAT THOSE PAYMENTS WILL BE USING THE FINANCIAL CALCULATOR KEYS SO I CAN DOUBLE CHECK.

Explanation / Answer

Monthly payment before the reset = $1,048.56 (Loan amount = $250,000, Term = 30 years, Interest 3 %, Compounded annualy, Payback - every month).

Monthly payment after reset = $1,300.77 (Loan amount = $233,757.89, Term = 27 years, Interest 5%, Compounded annualy, Payback - every month).

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