• Most banks default to 30 year mortgage term, meaning that if you only pay the minimum fortnightly or monthly repayment on the mortgage, it will take you 30 years to pay off the whole loan.
• The problem with this is that at today’s interest rates and average house prices, if you take 30 years to pay off the mortgage, the total interest over that 30 years can easily = more than the amount of the loan itself!
• EG you might take out a $300 000 mortgage and end up paying back over $300 000 just in interest alone!
• You would have effectively bought the house twice!
• But if you can just increase your repayments by $30 / week – you will have your loan paid off in 25 years.
• Your total interest would be around $60 000 less than if you took 30 years!
• So you see that it’s definitely worth it to make extra repayments to your mortgage and to pay off your mortgage sooner than 30 years. Use a good mortgage calculator to see what the difference of say an extra $30 a week would do to the total interest and total term on your mortgage!