30-year mortgages are now the most popular term with 57% of new mortgages taken out in 2022 issued with this long-term option – a figure that has been rising steadily since 2017, and one that’s highest amongst first home buyers (at 74% of this group).
While the length of the term can make the mortgage feel more affordable with lower re-payments – especially now as the cost of living is tightening our budgets – over the long term, a 30-year mortgage could cost you considerably more than you might think.
In some cases, you’d end up paying the bank back more than double the amount you originally borrowed. If you have a mortgage of 600,000, for example, with a mortgage interest rate of 5.45% – you’d end up paying $1,219,067 back to the bank (with $619,067 of that being interest payments).
As well as the straight dollar cost of taking longer to pay off your mortgage, the 30-year loan term can rob you of other opportunities to build wealth.
The money you’re using the pay off your mortgage could instead be used to invest in the share market. And, the sooner you grow the equity in your home, the sooner you can use that as leverage to buy an investment property.
What’s the alternative?
Many people would be surprised at how easy it can be to shave years off their mortgage.
In the above scenario, the fortnightly repayments on a 30-year term would be $1563. Even just an extra $100 per fortnight would take 4 years off the term of the mortgage and reduce their interest repayments by $97,885. That’s money they can use to invest elsewhere.
Of course, this isn’t the only way to save money on your mortgage and pay it off faster. enable.me strategic coach Katie Wesney will be sharing the strategies she uses with her clients so they can say sayonara to their mortgage with a FREE online webinar at 7:30pm, August 9th, 2022. Register to attend here.