A LIFETIME OF REPAYMENTS

Is 40 the new 30? While 25 years has traditionally been the standard term of a home loan, higher property prices are increasingly seeing lenders offer 30-year terms. Could we be heading to the 40-year term? It’s an option already available through a number of mainstream lenders including BCU and Teachers Mutual Bank. Extending the term of your mortgage will lower the monthly repayments but beyond this the benefits all flow the lender’s way. The longer the term, the more you’ll pay in interest. As a guide, on a loan for $300,000 at 4% you’ll pay $175,000 in interest over 25 years, rising to $215,600 over 30 years. A 40-year term will see the interest leap to $301,800 – more than the loan itself. This highlights the savings from selecting a shorter term. Making extra repayments, no matter how small, is a simple way to cut time off your mortgage.