A mortgage broker is offering a $281,000 20-year mortgage with a teaser rate. In
ID: 2820996 • Letter: A
Question
A mortgage broker is offering a $281,000 20-year mortgage with a teaser rate. In the first two years of the mortgage, the borrower makes monthly payments on only a 4.7 percent APR interest rate. After the second year, the mortgage interest rate charged increases to 7.7 percent APR.
What are the monthly payments in the first two years? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
What are the monthly payments after the second year? (Round the dollar amounts to the nearest cent, but do not round other values in your interim calculations. Round your final answer to 2 decimal places.)
References
A mortgage broker is offering a $281,000 20-year mortgage with a teaser rate. In the first two years of the mortgage, the borrower makes monthly payments on only a 4.7 percent APR interest rate. After the second year, the mortgage interest rate charged increases to 7.7 percent APR.
Explanation / Answer
A. Monthly rate = 4.7%/12 = 0.39166666%
n = no. of months = 12*20 = 240
Monthly payment in first two years = $281,000 / PVAF(0.39166666% , 240 months) = $1808.22
B.
Repayment Schedule during first 2 years
After 2 years remaining principal to be paid as shown above = $263229.23
New month rate = 7.7%/12 = 0.6416666%
Now monthly payment = $263229.23 / PVAF(0.6416666%, 216 months) = $2255.63
Period Rate p.m OPENING INTEREST PRINCIPAL INSTM CLOSING 1 0.0039167 281000.00 1100.58 707.64 1808.22 280292.36 2 0.0039167 280292.36 1097.81 710.41 1808.22 279581.95 3 0.0039167 279581.95 1095.03 713.19 1808.22 278868.75 4 0.0039167 278868.75 1092.24 715.99 1808.22 278152.76 5 0.0039167 278152.76 1089.43 718.79 1808.22 277433.97 6 0.0039167 277433.97 1086.62 721.61 1808.22 276712.36 7 0.0039167 276712.36 1083.79 724.43 1808.22 275987.93 8 0.0039167 275987.93 1080.95 727.27 1808.22 275260.66 9 0.0039167 275260.66 1078.10 730.12 1808.22 274530.54 10 0.0039167 274530.54 1075.24 732.98 1808.22 273797.56 11 0.0039167 273797.56 1072.37 735.85 1808.22 273061.71 12 0.0039167 273061.71 1069.49 738.73 1808.22 272322.98 13 0.0039167 272322.98 1066.60 741.63 1808.22 271581.35 14 0.0039167 271581.35 1063.69 744.53 1808.22 270836.82 15 0.0039167 270836.82 1060.78 747.45 1808.22 270089.37 16 0.0039167 270089.37 1057.85 750.37 1808.22 269339.00 17 0.0039167 269339.00 1054.91 753.31 1808.22 268585.69 18 0.0039167 268585.69 1051.96 756.26 1808.22 267829.42 19 0.0039167 267829.42 1049.00 759.23 1808.22 267070.20 20 0.0039167 267070.20 1046.02 762.20 1808.22 266308.00 21 0.0039167 266308.00 1043.04 765.18 1808.22 265542.82 22 0.0039167 265542.82 1040.04 768.18 1808.22 264774.63 23 0.0039167 264774.63 1037.03 771.19 1808.22 264003.44 24 0.0039167 264003.44 1034.01 774.21 1808.22 263229.23Related Questions
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