The recent rate cut will go some way to reducing the size of your mortgage repayments.
But some buyers are easing hip pocket impacts with a different strategy: a 40-year loan term.
Paying off your mortgage over a longer period reduces your loan repayments.
The difference in repayments between a 25-year loan and a 40-year loan is substantial – but so is the interest paid over the life of the loan.
A recent Finder analysis has revealed three lenders currently offer a 40-year mortgage, two of which are offered exclusively to first home buyers.
So is this a good deal or a shocker?
“Finder analysis showed the monthly repayment for the average Australian loan of $641,416 would drop by over $300 on a 40-year loan compared to an identical 30-year loan, but the full repayment would cost the borrower $316,000 more,” reports realestate.com.au.
The loan could be a handy option for young guns who want to downsize payments now but who are confident they can upsize them later and pay off the mortgage sooner.
Paying out the loan over the full term comes at a significant cost in the long run.
So is a 40-year loan term right for you? See an independent mortgage broker or financial adviser if you’re weighing up the best value mortgage for your next property move.
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