Aimee and Ben are purchasing a condominium and are financing $610,000. The mortgage is a 20-year 3/1 ARM at 4.15% with a cap structure of 1.5/10. What will their payments be for the first 3 years?

Question

Phillip Ortega

Mathematics

14 January, 15:26

Aimee and Ben are purchasing a condominium and are financing $610,000. The mortgage is a 20-year 3/1 ARM at 4.15% with a cap structure of 1.5/10. What will their payments be for the first 3 years?

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Craig Coleman · Answer 1

For the first 3 years, the interest will not be changed because of the 3/1 ARM policy. The interest will stay at 4.15%. The monthly payments will be based on the 4.15% and 20 year period. The interest is then converted to effective monthly rate by dividing by 12 and payments will computed using the formula

A = Pi (i + 1) ^n / [ (1 + i) ^n - 1]