Question

Suppose you borrow $197,500 on a 30 year adjustable rate mortgage loan. The fixed period is five years and the initial interest rate is 4.25%.

Question 2
Assume that you make all payments exactly as scheduled. How much will you owe at the end of the five year fixed period?

Answer 1

Assuming that the loan has monthly payments, the total number of payments in the 30-year loan would be 30 x 12 = 360.

To calculate how much is owed at the end of the five-year fixed period, we need to first determine how much of the principal (the borrowed amount) will be paid off during that time.

Using an amortization calculator, we can determine that with a 4.25% interest rate and monthly payments of $972.38, the principal paid off after five years will be approximately $25,732.37.

At the end of the five-year fixed period, the remaining principal balance will be $197,500 - $25,732.37 = $171,767.63. This will be the amount owed at the end of the fixed period.

Explanation: