An Investor is purchasing a fixer upper multifamily for $1,000,000.  She wants a mortgage loan for $800,000 or 80% loan to cost.  She went to a local bank, which offered her a Adjustable Rate Mortgage starting at 4% for the first year, the rate can adjust every year depending on the bank prime rate.  The loan amortizes using a 25 year schedule.

 

What is the monthly mortgage payments for the first year?

 

The interest rate adjusts the second year to 5%. What is the new mortgage payment the second year?