A customer would like to take out a 25-year adjustable rate mortgage loan for $260,000 with monthly payments. The first two years of the loan have a teaser rate of 4%, after that, the rate can reset with a 2% annual rate cap. On the reset date, the composite rate is 6%. What would the Year 3 monthly payment be?

$955

$1,567

$1,655

$1,586

Because of the rate cap, the payment would not change.