Assume the following for a one-year rate adjustable rate mortgage loan that is tied to the one-year Treasury rate:
Loan amount: $150,000
Annual rate cap: 2%
Life-of-loan cap: 5%
Margin: 2.75%
First-year contract rate: 5.50%
One-year Treasury rate at end of year 1: 5.25%
One-year Treasury rate at end of year 2: 5.50%
Loan term in years: 30
Given these assumptions, calculate the following:
Initial monthly payment
Loan balance end of year 1
Year 2 contract rate
Year 2 monthly payment
Loan balance end of year 2
Year 3 contract rate
Year 3 payment