In a 5/1 “hybrid” adjustable-rate mortgage (ARM), the initial interest rate is f
ID: 2715556 • Letter: I
Question
In a 5/1 “hybrid” adjustable-rate mortgage (ARM), the initial interest rate is fixed for 5 years, then is adjusted annually. (You usually pay “points” up front at closing in exchange for the “rate lock” for the first 5 years.) Suppose that you buy a house with a $ 340000, 30 year mortgage with a 5/1 ARM with initial rate of 4.5%; and suppose that five years later, the interest rate goes up to 8.9%.
Use the Bankrate amortization schedule online to determine what your monthly payment was, originally, at 4.5%? Monthly Payment =
What is your new payment? (Careful: the amount of the loan is no longer $ 340000 and you only have 25 years to pay it off.) New Monthly Payment =
Explanation / Answer
As per the Bank rate amortization schedule online-
Monthly payment is $1722.73
Computaion of Balance principle amount after 5 years Month Payment Opening payable Interest@4.5% Principle paid 1 $ 1,722.73 340000 $1,275.00 $ 447.73 2 $ 1,722.73 $ 3,39,552.27 $1,273.32 $ 449.41 3 $ 1,722.73 $ 3,39,102.86 $1,271.64 $ 451.09 4 $ 1,722.73 $ 3,38,651.77 $1,269.94 $ 452.79 5 $ 1,722.73 $ 3,38,198.98 $1,268.25 $ 454.48 6 $ 1,722.73 $ 3,37,744.50 $1,266.54 $ 456.19 7 $ 1,722.73 $ 3,37,288.31 $1,264.83 $ 457.90 8 $ 1,722.73 $ 3,36,830.41 $1,263.11 $ 459.62 9 $ 1,722.73 $ 3,36,370.79 $1,261.39 $ 461.34 10 $ 1,722.73 $ 3,35,909.45 $1,259.66 $ 463.07 11 $ 1,722.73 $ 3,35,446.39 $1,257.92 $ 464.81 12 $ 1,722.73 $ 3,34,981.58 $1,256.18 $ 466.55 13 $ 1,722.73 $ 3,34,515.03 $1,254.43 $ 468.30 14 $ 1,722.73 $ 3,34,046.73 $1,252.68 $ 470.05 15 $ 1,722.73 $ 3,33,576.68 $1,250.91 $ 471.82 16 $ 1,722.73 $ 3,33,104.86 $1,249.14 $ 473.59 17 $ 1,722.73 $ 3,32,631.27 $1,247.37 $ 475.36 18 $ 1,722.73 $ 3,32,155.91 $1,245.58 $ 477.15 19 $ 1,722.73 $ 3,31,678.76 $1,243.80 $ 478.93 20 $ 1,722.73 $ 3,31,199.83 $1,242.00 $ 480.73 21 $ 1,722.73 $ 3,30,719.10 $1,240.20 $ 482.53 22 $ 1,722.73 $ 3,30,236.57 $1,238.39 $ 484.34 23 $ 1,722.73 $ 3,29,752.22 $1,236.57 $ 486.16 24 $ 1,722.73 $ 3,29,266.06 $1,234.75 $ 487.98 25 $ 1,722.73 $ 3,28,778.08 $1,232.92 $ 489.81 26 $ 1,722.73 $ 3,28,288.27 $1,231.08 $ 491.65 27 $ 1,722.73 $ 3,27,796.62 $1,229.24 $ 493.49 28 $ 1,722.73 $ 3,27,303.13 $1,227.39 $ 495.34 29 $ 1,722.73 $ 3,26,807.78 $1,225.53 $ 497.20 30 $ 1,722.73 $ 3,26,310.58 $1,223.66 $ 499.07 31 $ 1,722.73 $ 3,25,811.52 $1,221.79 $ 500.94 32 $ 1,722.73 $ 3,25,310.58 $1,219.91 $ 502.82 33 $ 1,722.73 $ 3,24,807.77 $1,218.03 $ 504.70 34 $ 1,722.73 $ 3,24,303.06 $1,216.14 $ 506.59 35 $ 1,722.73 $ 3,23,796.47 $1,214.24 $ 508.49 36 $ 1,722.73 $ 3,23,287.98 $1,212.33 $ 510.40 37 $ 1,722.73 $ 3,22,777.58 $1,210.42 $ 512.31 38 $ 1,722.73 $ 3,22,265.26 $1,208.49 $ 514.24 39 $ 1,722.73 $ 3,21,751.03 $1,206.57 $ 516.16 40 $ 1,722.73 $ 3,21,234.87 $1,204.63 $ 518.10 41 $ 1,722.73 $ 3,20,716.77 $1,202.69 $ 520.04 42 $ 1,722.73 $ 3,20,196.72 $1,200.74 $ 521.99 43 $ 1,722.73 $ 3,19,674.73 $1,198.78 $ 523.95 44 $ 1,722.73 $ 3,19,150.78 $1,196.82 $ 525.91 45 $ 1,722.73 $ 3,18,624.87 $1,194.84 $ 527.89 46 $ 1,722.73 $ 3,18,096.98 $1,192.86 $ 529.87 47 $ 1,722.73 $ 3,17,567.11 $1,190.88 $ 531.85 48 $ 1,722.73 $ 3,17,035.26 $1,188.88 $ 533.85 49 $ 1,722.73 $ 3,16,501.41 $1,186.88 $ 535.85 50 $ 1,722.73 $ 3,15,965.56 $1,184.87 $ 537.86 51 $ 1,722.73 $ 3,15,427.70 $1,182.85 $ 539.88 52 $ 1,722.73 $ 3,14,887.83 $1,180.83 $ 541.90 53 $ 1,722.73 $ 3,14,345.93 $1,178.80 $ 543.93 54 $ 1,722.73 $ 3,13,801.99 $1,176.76 $ 545.97 55 $ 1,722.73 $ 3,13,256.02 $1,174.71 $ 548.02 56 $ 1,722.73 $ 3,12,708.00 $1,172.66 $ 550.07 57 $ 1,722.73 $ 3,12,157.93 $1,170.59 $ 552.14 58 $ 1,722.73 $ 3,11,605.79 $1,168.52 $ 554.21 59 $ 1,722.73 $ 3,11,051.58 $1,166.44 $ 556.29 60 $ 1,722.73 $ 3,10,495.29 $1,164.36 $ 558.37 After 5 years/60 months $ 3,09,936.92 Therefore after 5 yaers payable amount $3,09,936.92 Interest rate is 8.90% Number of years remaining left are 25 years. If the above figures are inserted in the online calculator you will get monthly installment of $2579.79 Therefore, new monthly installment after 5 years is $2,579.79Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.