Question

Adjustable Rate Mortgage: 3% with terms 5/1 with a 2/6 cap for 30 years (Assume the interest rate increases by 1.25% after the initial period and every 10 years thereafter.) The cost of the mortgage is $700,000 and i have 30 years to pay it off

Answer 1

i assume you are trying to create a payment table?

Answer 2

the rate of interest increase information is difficult to parse.

the mortgage says it best, 2% increase every year after the initial period, not to exceed a total of 6%

the assumption given seems to read: an increase of 1.25% after the initial ... and the same increase after every 10 years?

Answer 3

in general

the initial payments are defined the same as a fixed mortgage, and at the time it is changed, we determine the remaining time and balance as a new fixed rate loan; essentially refinancing it in year 5, year 15, year 25