In: Finance
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 each of the following $156,000, 30-year mortgages. Assume that the initial interest rate is 6.90 percent.
a. Annually adjustable, 1 percent per year, 5 percent lifetime cap. Assume also that rates increase at least 1 percent per year until they reach the lifetime cap and rates never again drop below the lifetime cap for the term of the mortgage.
Loan Amount | $156,000 | |||||||
No of Yrs | 30 | |||||||
Initial interest rate | 6.90% | |||||||
Interest rate not to exceed | 11.90% | (6.90%+5%) | ||||||
Payment in year 1 would be | ||||||||
Using PMT function in excel, we get | ($12,445.43) | PMT(6.9%,30,156000) | ||||||
Year 2, Interest rate will be 7.90% | ||||||||
Using PMT function in excel, we get | ($13,701.79) | PMT(7.9%,29,154318.57) | ||||||
Year 3, Interest rate will be 8.90% | ||||||||
Using PMT function in excel, we get | ($14,975.89) | PMT(8.9%,28,152807.95) | ||||||
Year 4, Interest rate will be 9.90% | ||||||||
Using PMT function in excel, we get | ($16,263.12) | PMT(9.9%,27,151431.96) | ||||||
Year 5, Interest rate will be 10.90% | ||||||||
Using PMT function in excel, we get | ($17,559.55) | PMT(10.9%,26,150160.61) | ||||||
Year 6, Interest rate will be 11.90% | ||||||||
Using PMT function in excel, we get | ($18,861.83) | PMT(11.9%,25,148968.57) | ||||||
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 | $12,191.17 | $1,510.62 | 13701.79 | $152,807.95 | |||
3 | $152,807.95 | $13,599.91 | $1,375.98 | $14,975.89 | $151,431.96 | |||
4 | $151,431.96 | $14,991.76 | $1,271.36 | $16,263.12 | $150,160.61 | |||
5 | $150,160.61 | $16,367.51 | $1,192.04 | $17,559.55 | $148,968.57 | |||
6 | $148,968.57 | $17,727.26 | $1,134.57 | $18,861.83 | $147,833.99 | |||
7 | $147,833.99 | $17,592.25 | $1,269.58 | $18,861.83 | $146,564.41 | |||
8 | $146,564.41 | $17,441.16 | $1,420.67 | $18,861.83 | $145,143.74 | |||
9 | $145,143.74 | $17,272.11 | $1,589.72 | $18,861.83 | $143,554.02 | |||
10 | $143,554.02 | $17,082.93 | $1,778.90 | $18,861.83 | $141,775.12 | |||
11 | $141,775.12 | $16,871.24 | $1,990.59 | $18,861.83 | $139,784.53 | |||
12 | $139,784.53 | $16,634.36 | $2,227.47 | $18,861.83 | $137,557.06 | |||
13 | $137,557.06 | $16,369.29 | $2,492.54 | $18,861.83 | $135,064.52 | |||
14 | $135,064.52 | $16,072.68 | $2,789.15 | $18,861.83 | $132,275.36 | |||
15 | $132,275.36 | $15,740.77 | $3,121.06 | $18,861.83 | $129,154.30 | |||
16 | $129,154.30 | $15,369.36 | $3,492.47 | $18,861.83 | $125,661.83 | |||
17 | $125,661.83 | $14,953.76 | $3,908.07 | $18,861.83 | $121,753.76 | |||
18 | $121,753.76 | $14,488.70 | $4,373.13 | $18,861.83 | $117,380.63 | |||
19 | $117,380.63 | $13,968.29 | $4,893.54 | $18,861.83 | $112,487.09 | |||
20 | $112,487.09 | $13,385.96 | $5,475.87 | $18,861.83 | $107,011.23 | |||
21 | $107,011.23 | $12,734.34 | $6,127.49 | $18,861.83 | $100,883.73 | |||
22 | $100,883.73 | $12,005.16 | $6,856.67 | $18,861.83 | $94,027.07 | |||
23 | $94,027.07 | $11,189.22 | $7,672.61 | $18,861.83 | $86,354.46 | |||
24 | $86,354.46 | $10,276.18 | $8,585.65 | $18,861.83 | $77,768.81 | |||
25 | $77,768.81 | $9,254.49 | $9,607.34 | $18,861.83 | $68,161.47 | |||
26 | $68,161.47 | $8,111.21 | $10,750.62 | $18,861.83 | $57,410.85 | |||
27 | $57,410.85 | $6,831.89 | $12,029.94 | $18,861.83 | $45,380.92 | |||
28 | $45,380.92 | $5,400.33 | $13,461.50 | $18,861.83 | $31,919.42 | |||
29 | $31,919.42 | $3,798.41 | $15,063.42 | $18,861.83 | $16,856.00 | |||
30 | $16,856.00 | $2,005.86 | $16,855.97 | $18,861.83 | $0.03 | |||
$390,491.6 | $156,000.0 | $546,491.5 |