George wants to buy an apartment that costs $600,000 with an 85% LTV mortgage. George got a 30 year, 3/1 ARM with an initial rate of 3.25%. The reset margin on the loan is 300 basis points above 1 year CMT. There are no caps. Tim anticipates the index to be 3.50% at the time of the 1st reset.
If the index resets to 3.50% as George forecasts, what will his new mortgage payment be in year 4?