Question

In a 5/1 hybrid adjustable-rate mortgage (ARM), the initial interest rate is fixed for 5 years, then is adjusted annually. (You usually pay points up front at closing in exchange for the rate lock for the first 5 years.) Suppose that you buy a house with a $ 300000, 30 year mortgage with a 5/1 ARM with initial rate of 6%; and suppose that five years later, the interest rate goes up to 8.3%.

Use the Bankrate amortization schedule online to determine what your monthly payment was, originally, at 6%?
Monthly Payment =

What is your new payment? (Careful: the amount of the loan is no longer $ 300000 and you only have 25 years to pay it off.)
New Monthly Payment =

Answer 1

1.
=PMT(6%/12,12*30,-300000)=$1,798.65

2.
=PMT(8.3%/12,12*25,FV(6%/12,12*5,PMT(6%/12,12*30,300000),300000))=$2,210.40