How Long Does it Take to Pay Off a Mortgage in Australia?
An overhead shot of an array of houses in Melbourne, Australia.
How Long Does it Take to Pay Off a Mortgage in Australia?
Buying a home is a huge milestone in anyone’s life, but how long does it usually take to pay off a mortgage in Australia? It’s an important question to know the answer to after building the money up for a deposit. In Australia, the journey to mortgage freedom can vary widely depending on factors like how much you borrow, interest rates, how often you make repayments, and your own financial situation. In this blog piece, we are going to head into some key details to shed some light on this important aspect of owning a home.
What Is a Mortgage?
A mortgage is a loan that’s given to somebody looking to purchase a house, flat etc. The property itself serves as collateral for the loan. In Australia, on average, mortgages have terms ranging from 25 to 30 years. Shorter terms such as 15 or 20 years can also be seen fairly regularly. The repayment period determines the amount of each repayment as well as the interest rate charged by the lender. But what sort of things can affect the time it takes to pay back a mortgage in full?
Key Terms To Know In The Mortgage Process
Loan Amount: The amount borrowed will always impact the time it takes to repay the mortgage. Higher loan amounts usually mean longer repayment periods unless you have plans in place for quicker repayments.
Interest Rate: Mortgage interest rates directly affect repayment amounts and the overall cost of borrowing. Lower interest rates can shorten the repayment time and reduce the total interest paid. If you’d like to learn more about interest rates and APR we have the perfect blog piece for you here.
Repayment Frequency: Choosing between weekly, fortnightly, or monthly repayments affects the total interest paid and can speed up the payoff timeline. The more you regularly repay the quicker you reduce the outstanding balance.
Extra Repayments: Making extra payments beyond the minimum requirement can reduce the loan term massively and save on interest costs over time.
Mortgage Repayments Example
Let's create a real-life example:
Loan Amount: $500,000
Interest Rate: 3.5% per annum
Loan Term: 30 years
Put that into a mortgage calculator:
Monthly repayment: Approximately $2,245
Total interest paid over 30 years: Approximately $306,000
If the borrower increases monthly repayments to $2,500:
Loan term reduces to: Approximately 25 years
Total interest paid reduces to: Approximately $241,000
As you can see with this example, a couple of tweaks in the repayment strategy can really take down the mortgage term and allow you to use more of your money for other things!
Can I Speed Up My Mortgage Repayment?
There are several ways to speed up a mortgage repayment. They include:
Increase Repayment Amounts: Increasing your monthly repayments extra each month, even by a small amount, can over the long term take years off the loan term and keep interest costs down.
Make Lump Sum Payments: Perhaps you’ve had a tax refund from the ATO or have had a pay rise recently. Putting that straight onto the payment plan will help take an extra amount off of the amount owed.
Research Your Refinance Options: Check out your options for getting lower interest rates or shorter loan terms. It could mean less time paying and less money out the door.
Budgeting and Financial Planning: A solid budget and financial plan make paying off that mortgage a strategic goal you can actually smash.
Summary
Understanding how long it takes to pay off a mortgage in Australia is key if you are thinking about taking one on, for most people it is the biggest purchase/investment they ever make so it’s good to know what you’re letting yourself into and for how long. Using the knowledge you’ve gained from interest rates and loan terms to ways of speeding up the repayment process, it’s all about using these insights to make your mortgage work best for you.
Paying off your mortgage isn’t just about crossing a mortgage free finish line, it shows smart money management and making clever choices along the way. With careful planning you can take yourself towards owning your home outright, locking in that financial security and peace of mind for the long haul.
Here at the GLOSS Vault, we have made it our mission to help as many people like you across Australia and New Zealand feel in control of your money and ensure you’re getting the most out of it. To find out more about us and what we do click here. If you’d like to see our app in action for yourself head here!