Question

A borrower takes out a 30-year adjustable rate mortgage loan for $500,000 with monthly payments. The first year of the loan has a “teaser” rate of 3%, after that, the rate can reset with a 7% annual payment cap. On the reset date, the composite rate is 5%. What would be the Year 2 monthly payment be?

Please show how to solve using a financial calculator.

Answer 1

Calculate the monthly payments as follows:

Therefore, year 2 monthly payment is $2,667.42.

Formulas:

a. Formulas of financial calculator:

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b.

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