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Let’s assume that you are applying for a mortgage in the amount of $380,000 at an interest rate of 7
Let’s assume that you are applying for a mortgage in the amount of $380,000 at an interest rate of 7.5%. This is 30 year amortizing 10/1 ARM. What is the debt service of this mortgage?
A. $2,657.02
B. $2,634.75
C. $4,342.06
D. $4,510.67
Given the following information, calculate the interest only payment on this commercial loan. 5/1 I/O ARM, Loan amount: $2,984,000, Interest rate: 4.5%, Term: 30 years. First year, annual and lifetime cap: 5%. Index: LIBOR. Margin: 2.5%
A. $15,119
B. $11,290
C. $11,190
D. $15,190
Expert Solution
First:
| Monthly payment | = | [P × R × (1+R)^N ] / [(1+R)^N -1] | |
| Using the formula: | |||
| Loan amount | P | $ 380,000 | |
| Rate of interest per period: | |||
| Annual rate of interest | 7.5000000% | ||
| Frequency of payment | = | Once in 1 month period | |
| Numer of payments in a year | = | 12/1 = | 12 |
| Rate of interest per period | R | 0.075 /12 = | 0.6250% |
| Total number of payments: | |||
| Frequency of payment | = | Once in 1 month period | |
| Number of years of loan repayment | = | 30.00 | |
| Total number of payments | N | 30 × 12 = | 360 |
| Period payment using the formula | = | [ 380000 × 0.00625 × (1+0.00625)^360] / [(1+0.00625 ^360 -1] | |
| Monthly payment | = | $ 2,657.02 |
Answer is:
2,657.02
Second:
Interest rate for first year = 4.5%
Interest payment each month = 2,984,000 * 4.5%/12 = 11,190
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