Question
A mortgage company offers borrowers a 3% annual interest rate on the one-year ARM that is amortized for 30 years. The index rate is forecast
A mortgage company offers borrowers a 3% annual interest rate on the one-year ARM that is amortized for 30 years. The index rate is forecast to be 4.5% for next year and the margin on this loan is 2%. The annual interest rate adjustment cap is 2%. What is the adjusted interest rate for the second year? What are the monthly payments for year 1 and 2 if $213,000 is borrowed? (Remember to use the balance as the new PV for 2nd year.)
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