Adjustable Rate Mortgage
Assume the loan amount is the same as the fixed rate loan above.
Property appraisal is $2.8
You wonder if an adjustable rate mortgage might be beneficial. You find a 3/2 product which you want to pursue.
Initial rate: 3% margin .25%, 30 year term.
End of three years, Index rises to 4.5%, margin continues.
End of five years, Index rises to 5.0% margin continues.
Answer these questions, show your work:
What is the monthly payment for the interval which begins at the end of the initial period of the loan?
What is the monthly payment for the interval which begins at the end of the first two-year interval of the loan?