Question

10. Five years ago you took out a 5/1 adjustable rate mortgage and the five-year fixed rate period has just expired. The loan was originally for $ 250,000 with 360 payments at 5 % APR, compounded monthly. a. Now that you have made 60 payments, what is the remaining balance on the loan? b. If the interest rate increases by 1 %, to 6 % APR, compounded monthly, what will be your new payments?

Answer 1

Loan amount					250000
Period of loan					360
Annual rate of interest					5%
Monthly rate of interest					0.42%
Annuity PVF at 0.4167% for 360 periods					186.2731
Monthly Payment to be made			(250000/186.27313)		1342.115
Req a:
Total Number of periods				360
Less: Number of instalment paid				60
Remaining instalments				300
Monthly Instalments					1342.115
Annuity PVf at 0.4167% for 300 periods					171.0532
Loan amount outstanding					229573.1
Req b:
Now Loan amount outstanding today					229573.1
Divide: Annuity For 300 periods at 0.50%					155.2069
Monthly Instalment for remaining tenure at new rate					1479.143
Note:
New annual rate			6%
Monthly rate of interest (6 /12)			0.50%