Question

Use your calculator to determine​ (1) the current mortgage payment​ (2) the total interest​ paid, (3) the payment after the first adjustment and​ (4) the maximum payment for the following ​$156,000​, ​30-year mortgage. Assume that the initial interest rate is 6.90 percent.

d. Fixed for 5 years and then adjustable every 5​ years, 3 percent per​ period, 6 percent lifetime cap. Assume also that rates increase at least 3 percent per year until they reach the lifetime cap and rates never again drop below the lifetime cap for the term of the mortgage.

Answer 1

	Loan Amount		$156,000
	No of Yrs		30
	Initial interest rate		6.90%
	Interest rate not to exceed		12.90%	(6.90%+6%)
	Payment in year 1 - 5 would be
	Using PMT function in excel, we get		($12,445.43)	PMT(6.9%,30,156000)
	Year 6, Interest rate will be 9.90%
	Using PMT function in excel, we get		($15,999.26)	PMT(9.9%,25,146349.81)
	Year 7, Interest rate will be 12.90%
	Using PMT function in excel, we get		($19,758.49)	PMT(12.9%,24,144839.18)
Years	Beginning Loan Balance	Interest Paid	Principal	Total Payments	Ending Balance
1	$156,000	$10,764.0	$1,681.43	$12,445.43	$154,318.57
2	$154,318.57	$10,648.0	$1,797.45	$12,445.43	$152,521.12
3	$152,521.12	$10,524.0	$1,921.47	$12,445.43	$150,599.65
4	$150,599.65	$10,391.4	$2,054.05	$12,445.43	$148,545.59
5	$148,545.59	$10,249.6	$2,195.78	$12,445.43	$146,349.81
6	$146,349.81	$14,488.63	$1,510.63	$15,999.26	$144,839.18
7	$144,839.18	$18,684.25	$1,074.24	$19,758.49	$143,764.95
8	$143,764.95	$18,545.68	$1,212.81	$19,758.49	$142,552.13
9	$142,552.13	$18,389.23	$1,369.26	$19,758.49	$141,182.87
10	$141,182.87	$18,212.59	$1,545.90	$19,758.49	$139,636.97
11	$139,636.97	$18,013.17	$1,745.32	$19,758.49	$137,891.65
12	$137,891.65	$17,788.02	$1,970.47	$19,758.49	$135,921.18
13	$135,921.18	$17,533.83	$2,224.66	$19,758.49	$133,696.52
14	$133,696.52	$17,246.85	$2,511.64	$19,758.49	$131,184.89
15	$131,184.89	$16,922.85	$2,835.64	$19,758.49	$128,349.25
16	$128,349.25	$16,557.05	$3,201.44	$19,758.49	$125,147.81
17	$125,147.81	$16,144.07	$3,614.42	$19,758.49	$121,533.39
18	$121,533.39	$15,677.81	$4,080.68	$19,758.49	$117,452.70
19	$117,452.70	$15,151.40	$4,607.09	$19,758.49	$112,845.61
20	$112,845.61	$14,557.08	$5,201.41	$19,758.49	$107,644.20
21	$107,644.20	$13,886.10	$5,872.39	$19,758.49	$101,771.82
22	$101,771.82	$13,128.56	$6,629.93	$19,758.49	$95,141.89
23	$95,141.89	$12,273.30	$7,485.19	$19,758.49	$87,656.71
24	$87,656.71	$11,307.72	$8,450.77	$19,758.49	$79,205.93
25	$79,205.93	$10,217.57	$9,540.92	$19,758.49	$69,665.01
26	$69,665.01	$8,986.79	$10,771.70	$19,758.49	$58,893.30
27	$58,893.30	$7,597.24	$12,161.25	$19,758.49	$46,732.05
28	$46,732.05	$6,028.43	$13,730.06	$19,758.49	$33,001.99
29	$33,001.99	$4,257.26	$15,501.23	$19,758.49	$17,500.76
30	$17,500.76	$2,257.60	$17,500.89	$19,758.49	($0.13)
		$396,430.0	$156,000.1	$552,430.2