Question

A borrower takes out a 30-year adjustable rate mortgage loan for $200,000 with monthly payments. The first two years of the loan have a "teaser" rate of 4%, after that, the rate can reset with a 2% annual rate cap. On the reset date, the composite rate is 5%. What would the Year3 monthly payment be?
(a) $955
(b) $1,067
(c) $1,071
(d) $1,186
(e) Because of the rate cap, the payment would not change.

Answer

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