When you bought your house for $300,000 5 years ago you took out a $250,000 mortgage...

When you bought your house for $300,000 5 years ago you took out a $250,000 mortgage with a 30 year ARM at 5%. Today is the five year anniversary and the rate adjusts to 10%. What is your new mortgage payment?

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Expert Solution

First, let's find the monthly payment with r = 5%/12 = 0.004166666667

n = 30 * 12 = 360

Now, lets find the loan outstanding after 5 years

n = (30 - 5) * 12 = 300

r = 0.004166666667

This is the loan outstanding after 5 years.

Finally, we will find the monthly payment with r = 10%/12 = 0.008333333333

n = 300

New mortgage payment = $2,086.1209324831

jeff jeffy answered 1 year ago

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