a. You consider refinancing your current mortgage loan with a new 20 -year, 4.8% fixed rate mortgage
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Question:
a. You consider refinancing your current mortgage loan with a new 20 -year, 4.8% fixed rate mortgage loan. The refinancing cost is 3.0% of the loan amount. You paid up 120 months on the current 30 -year mortgage loan that had a fixed rate of 6.9% , and the initial loan amount was $280,000 .
b. Consider a one-year ARM (i.e., 1/1), which has a 20-year term, offers an initial interest rate of 5.25% . It carries an interest cap of 2.75/2.0/6.5 , and a margin of 2.75% .
(i) Calculate its interest rate next year given that the index rate is 6.75% .
(ii) Calculate its interest rate in Year 3 when the index rate falls to 4.0% .
Related Book For
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078111044
16th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello
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