How to choose an amount you can repay in just 15 years
Max Phelps, founder of Golden Eggs and creator of the FIVE 2 Money Diet
Max Phelps says it's possible to pay off your home loan is half the time of a standard 30-year loan, and it all starts with borrowing the ideal amount.
"Pick a purchase price you can dominate, by borrowing well within your means," he advises.
"Banks assess your borrowing using an 'assessment rate' of over 5%, which means they make sure you can afford the repayments based on a 5% interest rate. So if you're only paying 2-2.5%, you should be able to pay off the loan – or build an offset up with savings to match the [outstanding] loan amount – in 15 years, should interest rates stay low for that long."
He suggests you use an online calculator and set the loan term to 15 years, the interest rate to current advertised rates and look for the loan amount that represents no more than half your net income.
For instance, based on your income, you might be eligible to borrow $950,000 over 30 years. But if you nudge the loan term down to 15 years, your borrowing power shrinks to $640,000.
This means you could:
- Buy a property worth around $700,000
- Using a 10% deposit of $70,000
- Take out a 30-year loan
- Make extra repayments every single month, equal to the amount you'd pay on a 15-year loan.
By following this strategy, you'll own the home outright in half the time.
"If interest rates do go up in future, you'll be grateful for every extra dollar you put in while they were low," Phelps adds, "because you'll have built up a buffer to help you cope with the increased cost of your mortgage."
Hello, I had a quick question on how to use this calculator. Can you please clarify what should be included in “other loans” under expenses? I currently do not have any other loans, but obviously, I have monthly expenses on food, groceries, utilities, etc. Should those be included under other loans? Please advise.
Hi Yogaesh,
Thanks for getting in touch with Finder. It’s nice to know that you’re interested in using our free calculator.
Regarding your question, your monthly expenses such as food, groceries, and utilities are not part of the “Other loans.” “Other loans” refer to other loans that you may have such as home loans, car loans, and personal loans.
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua
Hi im on centrelink and i want to buy a house , how much deposit do i need and how much can i borrow and which bank can offer me a home loan?
Hi Jennifer,
Thanks for reaching out.
You can definitely apply for a home loan if your Centrelink benefit is accepted by lenders. See our list of acceptable form of extra income. As stated on the page, if the benefit you receive from Centrelink is not listed on the chart above, then it may not be considered by lenders as a genuine form of income. In this case, it might be best to speak to a lender directly about your options and eligibility.
You can also speak to a mortgage broker who can take your personal circumstance into account and offer you a range of borrowing options.
Hope this was helpful. Feel free to message us should you have further questions.
Cheers,
Nikki
Hi I was looking at getting a personal loan with my credit score which would be the best bank to go through
Hi Francesco,
Thanks for your message and for visiting Finder.
There are different types of personal loans you can choose from. Different personal loans will require different documents to apply. Generally, these are the kind of documents that they will want to see:
Turnaround time will be vary depending on the loan you’re applying for and for which lender you’re borrowing money from. Traditionally, approval can take a few days up to a week, if you apply online, the process can be faster.
Make sure the check all the eligibility criteria needed to apply for a personal loan to ensure 100% approval.
Hope this helps! Feel free to message us anytime should you have further questions. Happy hunting!
Cheers,
Nikki
I want to borrow $260,000 to buy a house. I am an existing home owner who will be using equity.
Hi Cho,
Thanks for your inquiry. Please note that we are not affiliated with any company we feature on our site and so we can only offer you general advice.
You can also have a look on these pages to compare your options:
https://www.finder.com.au/home-loans/line-of-credit-equity-loans
https://www.finder.com.au/home-equity-loan-calculator
Please click the name of your preferred lender to find out the details and the minimum eligibility. You may then click the green “Go to Site” button to submit your loan application online.
Best regards,
Rench
I have ignorantly applied for lots of credit cards which offer enticements like frequent flyer bonus points not realising that this has affected my once excellent credit rating.how can i restore it.? I did not know by doing what i did was to be detrimental as have never not fulfilled my payment obligations nor been behind or bankrupt etc..it seems so unfair.please help!!
Hi Denice,
Thanks for getting in touch.
I’m sorry to hear about the enquiries on your file. Unfortunately, several enquiries on your file made by a credit provider can negatively impact your credit rating and that will stay on your credit file for five years. Basically, the only details or enquiries that can be removed from your credit file are those that are incorrect or erroneous.
Please check our step-by-step guide on how you can remove incorrect enquiries and improve your credit score.
Hope this helps.
Cheers,
May