If the Composite Rate 10 the 2 cap applies and the interest rate is 9 If the

If the composite rate 10 the 2 cap applies and the

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If the Composite Rate = 10%, the 2% cap applies and the interest rate is 9%. If the Composite Rate = 8%, the 2% cap does not apply and the interest rate is 8%.
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Adjustable Rate Mortgages Example: Payment Caps Loan Amount = $100,000 Starting Rate = 6% Term = 30 Years Adjustment Interval = 1 Year Payment Cap = 5%
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Initial Payment: = $100,000 = 360 = 6 = $599.55 n i PMT PV
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EOY1 Loan Balance: = 348 = $98,771.9 9 n PV
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New payment is based on loan balance of $98,771.99 The dollar increase in the payment cannot exceed the capped payment. Capped Payment = $599.55 x 1.05 = $629.53
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If the Composite Rate = 10%, the unrestricted payment would be: = $98,771.99 = 348 = 10 = $871.64 n i PMT PV
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Since the capped payment is $629.53, it would be used. If there is negative amortization, = $98,771.99 = 12 = $629.53 = $101,204.32 would be the EOY2 Loan Balance n FV PMT PV
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  • Winter '16
  • dr lizam
  • Interest, Mortgage loan

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