You are purchasing a condominium for $120,000 and will put a down payment on the condo sufficient to make it a 75% LTV. You do not envision living in the condo for more than 5 years so you are thinking of pursuing a 5/1 ARM that has a 2/6 min/max feature, a teaser rate of 3.25%, a floor equal to the teaser rate, a 30-year amortization period, a margin of 3.25 and an index based on the 1-year LIBOR. First of all, calculate your initial monthly payment for this loan based on the teaser rate. Secondly, if you are still in the loan after five years, what will your new rate AND payment adjust to if the 1-year LIBOR at that time is 3.1%?

Answer rating: 100% (QA)

Loan amount 120000 x 75 90000 Number of months n 30 ... View the full answer