How long does it take to pay off a mortgage? If you’re looking for the answer, Savvy has you covered. We have calculators to help you crunch the numbers, plus great tips on how to reduce the length of time it takes to pay off your mortgage. Savvy can help with all your finance comparison needs to help you find your perfect home loan.
Most lenders in Australia offer standard loan terms to first time buyers of either 25 or 30 years, so this could be regarded as the average length of time it takes to pay off a mortgage. However, statistically, most people will refinance their mortgage several times before they finally pay it off.
Naturally, the time it takes to pay off a mortgage depends on how big the mortgage is, the interest rate charged on your loan and the size and frequency of the repayments made to pay off the loan. You can use Savvy’s home loan repayment calculator to tell you what your loan repayments will be for any size of home loan. This will help you find out how long it’ll take you to pay off your home loan depending on the size of repayments you can afford.
In Australia, the average mortgage size is $595,568, according to Australian Bureau of Statistics’ (ABS) Lending Indicator Data for November 2021. For first homebuyers, the average loan size reduces to $471,425. However, this varies dramatically from state to state, ranging from the lowest of around $421,000 in SA to the highest of over $769,000 in NSW. It makes sense, therefore, that Aussies in NSW will take longer on average to pay off their loans.
Paying off your home loan earlier boils down to a few basic options:
You can use any of these techniques, or a combination of them, to reduce the time it will take you to pay off your home loan. Setting yourself a savings goal and having a mortgage-reduction plan in writing will increase your chances of successfully paying off your home loan sooner.
All of the techniques listed above will not only enable you to pay your loan off more quickly but also save you money in interest payments. Remember that interest is calculated daily, so every little bit you pay off your home loan will reduce interest charged in the future. In addition to reducing the daily interest payment, additional repayments will also pay your loan down more quickly, saving you months or even years in loan payments, which can equate to thousands of dollars saved overall.
For example, on a $450,000 loan taken out over 30 years at a 2.5% interest rate, the monthly repayment would be $1,779 per month, and in total you’d pay $190,096 in interest. We can also determine:
These examples illustrate how paying more off your home loan, or making repayments more frequently, can save you thousands in interest over the life of the loan.