Question

1) Explain what a 30-year, 5/3 ARM at 3.25% with a 2/9 cap means

Answer 1

can someone please help me!

Answer 2

@shifuyanli

Answer 3

hmmm...

Answer 4

is mortgage stuff

Answer 5

wow

Answer 6

I have 6 questions, could you help me with it?

Answer 7

I certainly can't to be honest but I can tag some people to help you :)

Answer 8

yes please!!! I need to do it ASAP

Answer 9

@iGreen @AnswerMyQuestions @cecormier @YanaSidlinskiy @Jaynator495

Answer 10

@GreenCat

Answer 11

Please help me please!!!

Answer 12

@amistre64

Answer 13

@tkhunny

Answer 14

1) Explain what a 30-year, 5/3 ARM at 3.25% with a 2/9 cap means

Answer 15

amistre is here

Answer 16

tell me your thoughts on it .. ill correct as needed

Answer 17

I just really dont know, not even where to start my thoughts

Answer 18

well, it a loan .. how long is it?

Answer 19

30 years ?

Answer 20

yep, now is it a fixed rate or an adjustable rate?

Answer 21

adjustable

Answer 22

so we know its a 30 year loan that has a rate that can change ... we need to know what the terms of that change is.

5/3 tells us about how often and when to make adjustments.

can you tell me what you think it would mean?

Answer 23

im not sure :/

Answer 24

if youve read your material you should have some inkling of a notion ... if not, then just make something up that sounds reasonable ... i cant do the thinking for you, but i can correct it.

Answer 25

we have a 30 year loan, that changes its rate; 5/3 tells us when and how often to change it.

come up with a notion that you think it may be ... its fine to be wrong

Answer 26

would it mean 5 time every 3 years?

Answer 27

thats at least a thought :)

the rate stays the same for the first 5 years of the loan
afterwards, every 3 years we are allowed to make an extra adjustment

5 initial years
--------------------
3 years for adjustments


now tell me what i said :)

Answer 28

we have a loan of 30 years that has a rate that can change. It stays the same the first 5 years, and then it can adjust every 3 years

Answer 29

..every 3 years afterwards. good

now we know how often it changes, we need to know HOW it changes

what is the initial interest rate?

Answer 30

3.25%?

Answer 31

good, now we have to adjust it based on the terms 2/9 cap

since this is telling us about the interest rate change, what are your thoughts as to its meaning?

Answer 32

it stays the same for the first 2 years and then it changes every 9 years?

Answer 33

no, but im glad your applying previous thoughts. it is similar but:

when we change the rate: it can only be raised up to 2% each time
and all the adjustments made, cannot exceed 9% in total.

lets say im giving you candy:

every hour for the first 5 hours, i give you 3.25 pieces of candy

then i add 2 more pieces, for the next 3 years, you get 5.25 pieces of candy

then i add 2 more pieces, for the next 3 years, you get 7.25 pieces of candy

then i add 2 more pieces, for the next 3 years, you get 10.25 pieces of candy

i can only give you 9 extra pieces all together, ive given you 8 so far soo for the rest of your life i give you 11.25 pieces of candy each year.

Answer 34

i chnged hours to years lol ....

keep it all hours, or keep it all years .... concepts the same tho

Answer 35

ohhhok

Answer 36

so then will all these concepts its what those terms means?

1) Explain what a 30-year, 5/3 ARM at 3.25% with a 2/9 cap means

cus this is the question^^^

Answer 37

yep

for 30 years, we pay back a loan that has an adjustable rate starting at 3.25%

the rate stays that same for the first 5 years, and then can only change every 3 years afterwards

the rate changes by at most by 2%, and the combined total adjustments cannot exceed 9% extra, so we are capped at 3.25+9 = 12.25 for the remainder of the loan.

Answer 38

yay!!!

Answer 39

I have 5 more questions but i dont want to take your time

are you busy?

Answer 40

>(B)< have a butterscotch :)

i can prolly help with one more

Answer 41

ok!

Answer 42

can it be 2 more? <3

Answer 43

lol

Answer 44

maybe, lets try one ore and see how my sanity holds up lol

Answer 45

ok:)

Answer 46

2) Explain the process for finding the remaining balance of a condo costing $200,000 and using the terms from question #1.

*Please don’t discuss the actual calculation, but the steps or process you go through to find the remaining balance and what that amount represents.

Answer 47

the same way we would determine the loan balance normally.

do you know a formula that determines the amount of a loan owed?

Answer 48

this would be an essay if we have to explain how a loan calculation functions as a matter of time ...

Answer 49

isnt it the full price minus what was already paid?

Answer 50

I only have to write the steps right?

Answer 51

regretabbly no

the payment is a combination of principal and interest; all the while the balance is compounding up and up

if the payments dont at least cover the interest that has collected, then we can never pay of the loan.

Answer 52

if we had a formula predefined for us, we could use it at every point in time that we need to make an adjustement.

Answer 53

so you dont know how i could answer this?

Answer 54

i have a formula that i developed .. but im not sure if its the same one that you would use.

Answer 55

i know how i would answer it, but im not taking the class so i dont know how YOU should answer it.

Answer 56

right?

Answer 57

we can use your formula

Answer 58

if we had a formula Bn that calculates the amount of loan to repay, then we would know how to adjust the terms of the loan.

after 5 years: B5 is a new loan, offered at the adjusted rate.
3 years afterwards: B8 is a new loan, offered at the adjusted rate.
3 years afterwards: B11 is a new loan, offered at the adjusted rate.
3 years afterwards: B14 is a new loan, offered at the adjusted rate.
3 years afterwards: B17 is a new loan, offered at the adjusted rate.

from B17 to B30, the rate doesnt change

Answer 59

i think the sites crashing again ... or my sanity is failing :)

Answer 60

yeah, its bead right now

Answer 61

bad****

Answer 62

not without explaining it, but i think thats not quite what the question is asking for.

the balance of a loan at any given payment period can be determined by how much interest has accumulated, and how many payments have been made.

B0 = B0 , we take out a loan for some Balance B, it takes on interest of a compounding rate of 'k'

B1 = B0(k) - P , we make a payment, after the interest add up
-----------------------------

B2 = B1(k) - P , we make a payment, after the interest add up

but ... we know the value of B1, use it

B2 = (B0(k) - P)(k) - P

B2 = B0(k)^2 - P(k) - P
-------------------------------

B3 = B2(k) - P , we make a payment, after the interest add up

but ... we know the value of B2, use it

B3 = (B0(k)^2 - P(k) - P)k - P

B3 = B0(k)^3 - P(k)^2 - P(k) - P
------------------------------

this carries on for the life of the loan and it forms a pattern that we can turn into a formula

Bn = Bk^n -P(k^n-1)/(k-1)

but im pretty sure this is NOT what your expected to explain

Answer 63

oh :/

Answer 64

if we know the formula for the balance of a loan to begin with, we just say we use it ...

if we had a formula Bn that calculates the amount of loan to repay, then we would know how to adjust the terms of the loan.

after 5 years: B5 is a new loan, offered at the adjusted rate.
3 years afterwards: B8 is a new loan, offered at the adjusted rate.
3 years afterwards: B11 is a new loan, offered at the adjusted rate.
3 years afterwards: B14 is a new loan, offered at the adjusted rate.
3 years afterwards: B17 is a new loan, offered at the adjusted rate.

for the remining year of the loan stays the same

Answer 65

**remaining years

Answer 66

3) Explain the process for finding the balloon payment for a house costing $190,000. The mortgage is a 20/5 Balloon at 4.05%.

this is the other question

Answer 67

how do you define a balloon payment? what does this type of loan represent to you?

Answer 68

ima start another quesito and tag you ok?

Answer 69

20/5 means

the loan is figured as if it was a 20 year fixed rate loan

the loan is paid for 5 years, then the loan is paid off with a balloon payment.

the balloon payment is the value of the amount of the loan after 5 years.

Answer 70

ill be back later, the sites not acting right on my end at least. tag me and ill be able to find it later ... if this is a timed event, i wish you luck tho :)