Reset mortgage allows for one interest rate reset

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Reference no: EM131020995

A reset mortgage allows for one interest rate reset during the life of the loan. The mortgage rate will be reset after 5 years, to fully amortize at the end of the original 30 year period (i.e. after 25 more years). For a 6 5/8%, $120,000, mortgage, compute the reset payment if the new rate resets to 8%. (Hint: calculate how much balance you have after you pay for 5 years at the rate of 6.625%, then use the balance as the new PV). Assuming monthly compounding. First five years: 1-INPUT, 60-AMORT.

Reference no: EM131020995

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