Which loan would be a better chose?

You are planing to purchase a house for $180000. You will pay 20% down payment and take a mortgage Show more You are planing to purchase a house for $180000. You will pay 20% down payment and take a mortgage loan for the remaining 80%. You could get a 1/3 ARM amortized over 15 years at 3.9% or a fixed 15 year FRM loan at 5.3%. The expected interest rate of the ARM from years 4 to 5 is 7.5%. You will live in the house for five years and after that you expect to sell the house for $200000 and pay off the reamining loan balance. Assume that the upfront costs and insurance under both loan options are the same. MARR is 10% per year compounded monthly. Which loan would be a better chose? Consider the NPW of the payments and ignore the tax. Fill the table. And show equations used for monthly mortgage payment for ARM in months 1-36 and in month 37-60 as well as for FRM Month ARM FRM 0 down payment 1-36 (monthly payment) 37-60 (monthly payment) 60 (payment from selling the house) 60 (payment to pay off remaining loan balance NPW Show less

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