A reset mortgage allows for one interest rate reset during the life of the loan. The...

A reset mortgage allows for one interest rate reset during the life of the loan. The mortgage rate will be reset after 5 years, to fully amortize at the end of the original 30 year period (i.e. after 25 more years). For a 6 5/8%, $120,000, mortgage, compute the reset payment if the new rate resets to 7 3/8%. (Hint: calculate how much balance is left after you pay for 5 years at the rate of 6.625%, then use the left balance as the new PV, pay it off for the rest of the 25 years @ the rate of 7.375%). Assuming monthly compounding.

First five years: 1-INPUT, 60-AMORT.

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jeff jeffy answered 1 year ago

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