You are purchasing a home for $490,873.  You are going to finance 80% of the purchase with a 5/1 adjustable-rate mortgage.  The current rate on the mortgage is 4.41% but it will adjust to 6.47% after 5 years.   How much will your current mortgage payment be?

Answer should be formatted as a dollar amount rounded to the nearest cent.


To find the current mortgage payment, we need to calculate the monthly payment for a fixed-rate mortgage for the first 5 years at 4.41% interest, based on financing 80% of the home's purchase price.

Here are the steps:

1. **Calculate the loan amount:**
   - Loan amount = 80% of $490,873.
   
2. **Determine the monthly interest rate:**
   - Annual interest rate = 4.41%
   - Monthly interest rate = 4.41% / 12

3. **Determine the number of payments:**
   - Since it's a 5/1 ARM, the rate is fixed for the first 5 years.
   - Number of payments in 5 years = 5 * 12

4. **Calculate the monthly payment using the formula:**
   \[
   M = P \frac{r(1+r)^n}{(1+r)^n - 1}
   \]
   - Where:
     - $ M $ is the monthly payment
     - $ P $ is the loan amount
     - $ r $ is the monthly interest rate
     - $ n $ is the number of payments

Let's calculate the monthly payment step-by-step.The current mortgage payment will be **$7,305.02** per month.

Would you like more details or have any questions? Here are some related questions:

1. How will the payment change when the rate adjusts after 5 years?
2. What is the total interest paid during the first 5 years?
3. How would a different down payment affect the monthly mortgage?
4. What would the payment be if the interest rate were fixed for the entire loan term?
5. How does an adjustable-rate mortgage compare to a fixed-rate mortgage?

**Tip:** Adjustable-rate mortgages (ARMs) can offer lower initial rates but come with the risk of higher payments when rates adjust. Always plan for potential rate increases in your budget!

Learn how to calculate the current mortgage payment for a $490,873 home purchase using a 5/1 adjustable-rate mortgage (ARM). The solution covers finance concepts, interest rates, and mortgage calculations. Suitable for advanced learners and homebuyers.

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