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Suppose you have a 5/1 Interest only ARM with a 5-year teaser rate of 3%, a 30 year loan of $400,000, , and a 2% per year cap. The loan is interest only for the first 5 years, and becomes fully amortizing after that. The LIBOR is 2% and used as index. The margin is 3%. After 5 years, the LIBOR rises to 4%. Calculate the monthly mortgage payment at the beginning of year 6.
Answer should be 2,827.12
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- Consider a one-year, $150,000 ARM with a 30-year amortization period. The index rate is currently 3.75 percent and you estimate that it will increase by 25bp (0.25%) each year for the following 2 years. The fixed margin is 225bp (2.25%), but the lender is offering a teaser rate of 5 percent for the first year of the mortgage. a) Calculate the contract rate, remaining loan balance, and monthly payment for each of the three years. b) Suppose that the ARM has a 1 percent annual adjustment cap and a 6 percent overall cap. What is the loan balance and monthly payment for each of the three years?A Fixed Rate Mortgage (FRM) for $160,000 is made at a time when the market interest rate is 12%. The loan is partially amortizing, at the end of the maturity date there is a balloon payment of $25,000 to be able to pay off all the loan. The loan has a maturity of 30 years and payments will be made monthly. What will be the monthly payments? (Answer is rounded)Consider a 15 year, fixed rate mortgage for $150,000 at a nominal rate of 8%. The loan comes with a facility to pay end of year installments. What is the duration of the loan? If interest rates increase to 8.25% immediately after the mortgage is made, how much is the loan worth to the lender?
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- Suppose that you have just borrowed $225,000 using an adjustable-rate mortgage. Suppose that the payment is scheduled to adjust at the end of every year. Use the information provided below to calculate the year 2 payment for this loan. Index rate: Margin: Periodic Cap: Lifetime Cap: Amortization: $1,107 $1,160 $1,296 $1,178 1-year CMT (Currently 1.01% and will increase to 2.06% at the end of the 1st year) 275 basis points 2 percentage points 5 percentage points 30 years with monthly payments and compoundingAssume you have taken out a partially amortizing loan for $1,000,000 that has a term of 7 years, but amortizes over 20 years. Calculate the balloon payment if the interest rate on this loan is 10%Consider a GNMA mortgage pool with principal of $20 million. The maturity is 30 years with a monthly mortgage payment of 10 percent per year. Assume no prepayments. What is the monthly mortgage payment (100 percent amortizing) on the pool of mortgages? If the GNMA insurance fee is 6 basis points and the servicing fee is 44 basis points, what is the yield on the GNMA pass-through and the monthly payments?
- Consider a $150,000 loan with an annual interest rate of 6.5 percent and a 30-year term. Discount points are equal to 2 percent. All other up-front financing costs to be paid by the borrower total $3,000. Compute the monthly payment and the loan balance at the end of months 1–6. What is the effective borrowing cost (EBC), assuming that the loan remains outstanding to maturity?Consider a 30-year, 6% loan for $240,000 with fixed monthly payments. a) What will be the remaining mortgage balance after the first 6 years? b) How much of interest is to be paid over the first 6 years? c) How much of principal reduction is to take place over the first 6 years?Please show working You get a 15 year, 3.5% fixed-rate mortgage with one point, borrowing $300,000. a. what are your initial payments? b. what is the loan’s APR? c. suppose you prepay after 5 years, what is the outstanding loan balance? d. if you do prepay after 5 years, what is the effective annual rate?
