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Mark obtains a mortgage for $250,000 with the following terms:

 

15 year 5/1 ARM at 6.5% with a 3/7 cap structure

Initial monthly payment: $2,177.77

 

What will be the balance of the loan at the end of the initial interest rate period?

Guest Apr 7, 2017
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The easiest way is to amortize the mortgage, as I have done here, and look at the balance at the end of the 5th year.As you can see, the balance will be: $177,711.51. See it here:

http://www.calculator.net/amortization-calculator.html?cloanamount=250000&cloanterm=15&cinterestrate=6.5&printit=0&x=50&y=18

Just copy and paste it in the address bar of your Browser.

 

P.S. If your teacher does not approve of this, then you have to do it the long way, which is:

1. Find the FV of the $250,000 for 5 years or 60 months @ 6.5%.

2. Find the FV of the 60 monthly payments @6.5%.

3. Subtract 2 from 1 above, which will give you the balance of the mortgage after 5 years or 60 months. If you don't make any mistakes, you should get the above balance of $177,711.51.

Guest Apr 7, 2017

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