Your friend chose an ARM for the purchase of their new home. They would like to

Question

Your friend chose an ARM for the purchase of their new home. They would like to determine what the payment schedule will be. You decide to help and determine the following information to help you provide the answer. The contract rate is Prime – 1% where the current prime rate is 3.25%. The mortgage is a 15 year 1/1 ARM 2/1/3. The purchase price of the home is $235,000 and the LTV of the mortgage is 70%.

You expect that Prime will be

3.25% in Year 1

4.50% in Year 2

5.50% in Year 3

6.50% in Year 4

4.00% in Year 5

What is the monthly mortgage payment for each of the first 5 years?

What is the amortization schedule for each of the first 5 years?

Explanation / Answer

So accordingly divide mortgage amount by 12*15, so you will get 913.89

Now, take as follows,

don't get confused, interest will rise because interest rate changes from year to year.

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.