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Repayments on a $500,000 Mortgage

Work out what your repayments could be on a $500,000 mortgage using Savvy’s calculator and compare home loan offers here.

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, updated on August 8th, 2023       

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There are so many different factors which can impact your home loan repayments, so it’s important to have an idea of what these may be to help inform you of what your home loan may end up costing. If you’re in the market for a $500,000 mortgage, find out what your repayments may be and start comparing from a range of options with Savvy today.

Which factors affect the repayments on my $500,000 mortgage?

When it comes to your home loan repayments, there are several key variables which will impact the cost of your mortgage. It’s important to understand all of these before signing onto your home loan, as employing just one of the following factors can save you a meaningful amount over the life of your home loan. These include:

Interest rate

Of course, the interest rate you’re offered on your home loan will play a big role in shaping your $500,000 home loan repayment. Even minor differences in the mortgage rate can have a significant impact on what you end up paying overall. For example, a $500,000 home loan with monthly repayments over 30 years would cost $2,108.02 for each instalment (and $258,887 overall) at a 3% p.a. interest rate. Cutting that rate down to 2% p.a. instead would not only reduce monthly repayments to $1,848.10, but also total interest to $165,315. In many ways, interest holds the key to your mortgage savings.

Loan term

The longer your loan term, the more interest and fees you’ll pay. For this reason, any opportunity you can take to shorten your term, whether that be via additional repayments or a shorter initial term, should be seized upon. For instance, a $500,000 mortgage with monthly repayments at 2.5% p.a. over 30 years would produce instalments of $1,975.60 and cost $211,218 in interest overall. However, while a 25-year term would increase repayments to $2,243.08, the interest you’d pay over the life of the loan would fall dramatically to $172,925, representing a total saving of almost $40,000.

Fees

In the same way as interest, mortgage fees can shape a significant portion of the cost of your $500,000 loan repayments. This is represented in part by a loan’s comparison rate, which serves as a more representative reflection of the cost of a mortgage by combining rates and fees into one percentage figure. Even reducing a monthly fee from $15 to $5 will add up to an incredible saving of $3,600 over the life of the loan. You should familiarise yourself with home loan fees by comparing mortgage offers with Savvy, enabling you to make a more confident choice on which offer is most affordable.

Repayment frequency

While you may not think it, how often you make repayments will actually impact not only what you pay per instalment but also your overall loan cost. Because fortnightly repayments represent the equivalent of 13 months’ worth each year (26 fortnights compared to 12 months), you’ll actually save a great deal overall by selecting this schedule. A $500,000 loan with monthly repayments over 30 years at 2.75% p.a. would cost $2,041.21 and $234,834 in interest, but a fortnightly instalment would set you back $1,020.60 every two weeks and only $204,933 in overall interest, a saving of almost $30,000.

Interest type

Whether you’ve chosen to go with a variable home loan interest rate or a fixed rate will impact the consistency of cost for your $500,000 home loan. Variable interest rates are left open to fluctuation, meaning the amount you actually have to repay may vary from month to month. While this places you in an ideal position to capitalise on rate drops, it also leaves you vulnerable to increases in your lender’s interest. Fixed rates give you the luxury of certainty when it comes to how much you’ll be setting aside each month, but also may end up costing more due to locking you out of rate decreases.

Top tips for reducing your $500,000 mortgage repayments

Compare home loan offers with Savvy

One of the best things you can do to prepare yourself for the purchase of your home and signing of your mortgage contract is to thoroughly compare as many mortgage offers as you can. You can do this with Savvy, where we break down offers from our lenders to show you the most crucial features of each offer.

Take advantage of introductory rates

Many lenders offer introductory interest rates as a means of enticing customers to choose them to borrow from, which can often be highly lucrative. These initial low repayments can result in a noticeable saving overall, although it’s crucial to ensure that their revert rate is also competitive at the end of the initial introductory period.

Utilise a mortgage offset account

Many mortgages come with an attached offset account these days, which can be a great help for reducing the cost of your home loan. While you may not see an immediate difference in your repayments, offsetting your mortgage with these funds will mean you’re paying a lesser portion of interest sooner.

Put forward a larger deposit

Saving up more money from the outset will reduce your overall loan debt considerably, thus slashing your required repayments for each month. A $500,000 home loan over 30 years at 3.5% would come with monthly instalments of $2,245.22 but adding $50,000 to your initial deposit will result in a monthly reduction of over $200 and overall saving of more than $30,000.

More questions about house deposits and how to save for them

Can I ask my lender for a lower interest rate?

Yes – many borrowers successfully negotiate on interest rates to help them maximise their savings. This can either come about in the initial stages of negotiating your contract before you’ve purchased your house or after you’ve been repaying your loan for several years and are looking to reduce your costs. It’s important to compare and keep an eye on offers available around the country so that, if you come across a particularly attractive rate, you can ask your lender to price match it.

Am I able to top up my home loan down the track?

Yes – after a few years of repaying your home loan, you’ll have built up a reasonable amount of home equity. Equity is the difference between the value of your home and the amount still owing on your mortgage. For instance, a $600,000 property with $500,000 still owing would have $100,000 in home equity. Once you’ve built this up, you can use this equity to top your loan back up to $500,000 for a variety of reasons, such as renovating your home. You may also use equity to help you purchase an investment property.

What government assistance is available for first homebuyers with a $500,000 home loan?

The main assistance available to first-time borrowers is the First Home Owner Grant (FHOG), which entitles eligible recipients to up to $10,000 to $15,000 to use towards your home purchase, whether that be as part of your deposit or otherwise. You may also look into the First Home Loan Deposit Scheme (FHLDS) to have up to 15% of your deposit guaranteed by the government. This means you’d only be required to submit a 5% deposit when you otherwise may not have been able to. Check the national or your state or territory government website to see whether you’re eligible for assistance.

How much will I need for a deposit on my $500,000 mortgage?

Most home loans require a deposit of at least 20% to be approved by a lender, meaning you’ll have to save up a minimum of $100,000 as a deposit. However, by utilising government assistance such as the FHLDS, you may only be required to save up $25,000 of your own money without having to contribute Lenders Mortgage Insurance (LMI). With a guarantor on your home loan, you may not even need a deposit at all, depending on their financial situation.

Should I look at an interest-only home loan period?

Probably not – while an interest-only home loan allows for smaller repayments for an initial period of one to five years (given that you’re only paying interest, rather than the principal loan amount), you’ll end up paying more overall for this type of loan. This is because, rather than having your principal gradually reducing over time, you’ll be paying interest on the maximum home loan amount throughout that period. You also won’t be able to build equity in your home either, meaning it’ll take longer to access it.

What is a redraw facility?

A home loan redraw facility is a feature on your home loan which enables you to withdraw from the additional repayments you’ve already made towards your home loan. This is useful if you have a sudden need for funds which you otherwise may not have access to, such as to complete renovations around your home, but it’s important to note that doing so will increase your home loan debt and thus require you to pay more interest overall.

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