Question

Matt obtains a mortgage for $400,000 with the following terms:
25 year 7/1 ARM at 4.5% with a 3/8 cap structure
Initial monthly payment: $2,223.33
What will be the balance of the loan at the end of the initial interest rate period?

Answer 1

$213,240.28
$328,737.10
$348,105.14
$351,431.61

Answer 2

@jim_thompson5910 i am so sorry for bothering you again this is the last one i'll ask you lol i just have trouble with ARM's

Answer 3

what is the initial interest rate

Answer 4

4.5%

Answer 5

how long does that interest rate stay at 4.5%

Answer 6

7 years?

Answer 7

yes, then the 1 in "7/1" means the interest rate will increase every year

the increase will be 3% each time (3 is from the "3/8 cap")

the max amount they can increase the interest is 8% (8 is from the "3/8 cap")

Answer 8

anyways, doing this by hand is definitely a pain, but we can use a calculator

Answer 9

one sec

Answer 10

ok go here

http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx

Answer 11

type in 400,000 for the mortgage amount

4.5 for the interest rate

25 for the years

then click "show amortization table"

Answer 12

tell me when you've done so

Answer 13

okay

Answer 14

alright got it

Answer 15

notice how the table starts at Dec 2014, basically next month

Answer 16

we will add 7 years to this to get to Dec 2021. We stay in the same month to add exactly 7 years

then go back one month to Nov 2021 and look at the last column. This figure is the balance you still owe

Answer 17

this balance is the amount AFTER you make the payment in Nov 2021

Answer 18

so B?

Answer 19

yes I agree

Answer 20

that table is really handy! haha

Answer 21

thanks so much

Answer 22

now you could do all that by hand, but you'd have to work 12*7 = 84 rows (I think), which is definitely overkill

Answer 23

np

Answer 24

yes keep this site or something like it in mind when you buy a house in real life

Answer 25

yes definitely and i hopefully won't be doing that for a while but i'll remember it