DO ON PAPER? A borrower takes out a 15-year adjustable rate mortgage loan for $350,000....
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DO ON PAPER? A borrower takes out a 15-year adjustable rate mortgage loan for $350,000. Loan term: 3/1 ARM with an initial teaser rate of 2.4%. Resets are based on prime rate with 1.5% margin. Annual Cap = 2%. Lifetime Cap = 6%. The borrower is facing an economic environment with interest rate expected to increase over next 5 years.
A) At end of year 3, prime rate is expected to be 2%. What is the monthly payment for year 4?
B) At end of year 4, prime rate is expected to be 5%. What is the monthly payment for year 5?
C) At end of year 5, prime rate is expected to be 7%. What is the monthly payment for year 6?
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