Buying your house is most likely going to be the biggest purchase of your entire life. Before you put your first deposit down and enter into the wonderful world of crippling debt, we hope you take the time to calculate the total mortgage cost you are committing to.
Some people are unaware of how upfront costs they will incur, and how much interest they will end up paying over the lifetime of their home loan.
We’ve put together an infographic to break down the typical home loan and help you understand the total lifetime mortgage cost:
The surprising costs of your mortgage
The first epiphany first-time buyers make is that the upfront costs of buying a property are so high. Expect to pay around 15% of your total cost over 30 years before you even start assembling the newly purchased Ikea furniture and hanging your ‘Live. Laugh. Love’ posters.
The second realisation is finding out exactly how much interest you will pay over the lifetime of your loan. In the above example, a customer would expect to pay $632,000 for their $900,000 house. Or 40% of their total money spent just on interest alone.
The final step in enlightenment is realising that that to buy your new $900,000 home, you’re going to have to pay an additional $682,000. Or an additional 75% of the initial value of the home in order to completely own it.
Why are we telling you this?
Please be aware when bidding on properties and finding your new home that there are many expenses that are hidden behind the price tag and come result in a lot of stress in the long run.
The purchase of a new home is not something to take lightly. Small changes in market prices, interest rates, your job or other unforeseen circumstances can have a big impact on your, and your family’s, health if you are stretched too far on your mortgage payments.
Please also be aware that the numbers in this infographic are indicative only and will differ based on your individual mortgage terms and values.
The Mortgage Data
- House: 900,000 (Median Victorian house price)
- Loan Value: $720,000
- Deposit: $180,000 (20%)
- Term: 30 years
- Interest Rate: 4.75%
- Payments: Monthly
- Stamp Duty & Other Costs: $ 50,000 (Calculation on average 900,000 puchase)
- Deposit: $ 180,000 (note: below 20% will incur additional LMI fees)
- Interest: $ 632,000 (4.75% with monthly repayments)
- Principal: $ 720,000
- Principal: 720,000 (45%)
- Interest: 632,000 (40%)
- Upfront Costs: 230,000 (15%)