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Amortize the loan

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Reference no: EM133061824

An interest-only ARM is made for $206,000 for 30 years. The start rate is 5 percent and the borrower will make monthly interest-only payments for three years. Payments thereafter must be sufficient to fully amortize the loan at maturity.

Required:

a. If the borrower makes interest-only payments for three years, what will the payments be?

b. Assume that at the end of year 3, the reset rate is 6 percent. The borrower must now make payments so as to fully amortize the loan. What will the payments be?

Reference no: EM133061824

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