A borrower takes out a 30-year adjustable rate mortgage, Ask an Expert

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A borrower takes out a 30-year adjustable rate mortgage loan for $530,000 with monthly payments. The first two years of the loan have a “teaser” rate of 4.375%, after that, the rate can reset with a 5% annual payment cap. On the reset date, the composite rate is 6.5%. What is the monthly payment beginning in Year 3? If negative amortization is allowed, what is the outstanding balance on the loan at the end of Year 3? How much, if any, is the negative amortization?

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Financial Management, Finance

Category:- Financial Management
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