Assume a $500,000 standard ARM with a 30 year term and a 5% payment cap (the payment cannot increase by more than 5% over prior year) and negative amortization. The initial rate of 3.5% resulted in a payment of $2,245 in Y1 and an ending loan balance of $490,404. 

What is the Y2 monthly payment if interest rates increase to 6%?

Answer rating: 100% (QA)

To calculate the Y2 monthly payment we need to consider the payment cap and the negative amortizatio... View the full answer