You have a choice between a 30-year fixed-rate loan at 5.5% and an adjustable-rate mortgage (ARM) with a first-year rate of 33%. Neglecting compounding and changes in principal, estimate your monthly savings with the ARM during the first year on a $225,000 loan. Suppose that the ARM rate rises to 10.5% at the start of the third year. Approximately how much extra will you then be paying over what you would have paid if you had taken the fixed-rate loan?

What is the approximate monthly savings with the ARM during the first year?