David purchased a property for $2 million and arranged a mortgage with DBS bank to borrow 80% of the property value. The current mortgage rate is 3.5% p.a. David intended to repay his mortgage over 20 years. The mortgage repayment is made at the beginning of every month. Required: (a) Compute the principal and interest repayments separately, which David has paid in total for first 3 months.

(b) David expects the interest rate would increase by 50 basis points (0.5%) if he borrows one month later, but he still wants to pay a same monthly repayment for his mortgage, what advice could you give to David?

Answer rating: 100% (QA)

a To compute the principal and interest repayments separately for the first 3 months well use the fo... View the full answer