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Do you have any idea how much your mortgage is really costing you? Source: ThinkStock
CAN’T imagine spending $1 million on a home? Surprisingly despite the listing price, many of us are paying that much and we don’t even know it.
According to the latest figures from finder.com.au anyone borrowing $489,300 or more will end up paying more than $1 million for the property over the course of a 30 year loan at the current average variable interest rate.
While lending documentation is required to spell out exactly how much borrowers will end up paying over the lifetime of their loan, finder.com.au money expert Michelle Hutchison said not everyone knew how to find that information.
Ms Hutchison said it appeared a lot of home buyers didn’t take into account the end price they would be pay when they took out a mortgage.
“While it’s likely that your home will increase in value over a 30-year loan term, it might not compensate the cost of a home loan,’’ she said.
“The money you end up spending can be greatly increased if you have a small deposit and don’t shop around for a good value deal,†she said.
Using current median house price data, you end up paying a lot more over the life of a 30 year loan if you buy in Sydney.
With a median house price of $825,000, minus a 20 per cent deposit, a mortgage of $660,000 would cost $1 million within 11 years and $1.349 million after 30 years.
Ms Hutchison says you can save thousands on your mortgage you just need to keep a check on it. Source: Supplied
At Melbourne’s median house price of $633,000, a mortgage of $506,400 (with a 20 per cent deposit) would cost borrowers $1.035 million over 30 years.
Ms Hutchison said borrowers really needed to educate themselves about how much their mortgage was costing them.
Ideally, she said, they should check their home loan every year and make sure they are getting the best deal possible.
Paying a little extra, making weekly repayments and shopping around for better interest rates can take years and thousands off the term of a loan.
For example on a mortgage of $489,300, based on the current variable interest rate, paying an extra $50 a month can save more than $26,000 and shave off 15 months from the 30-year loan term.
“Add an extra $200 per month to monthly repayments for this loan size and you could save over $89,000 over the life of the 30-year loan and cut it down to 25 years and six months,’’ she said.