How long should my home loan be?

Happy couple searching.The longer your repayment term the more interest you pay. Work out how long mortgage needs to be.

The longer the term is, the lower your repayments will be over time, but the more interest you'll pay. A few years can make a significant difference in the overall cost of your home loan.

Length of mortgage comparison

Let's compare a 25 and 30 year mortgage.

Loan details 25 Years 30 Years
Loan amount $300,000 $300,000
Interest rate 6.70% p.a. 6.70% p.a.
Monthly repayment $2,063 $1,936
Total interest payable $318,982 $396,900
Interest saving $77,918

* based on monthly, principal and interest repayments

In this example, the choice of a 25 year home loan length does cost the borrower an extra $127 per month compared with a 30 year loan, but it also saves the borrower a staggering $78,000 over the life of the loan.

On the other hand, a 30 year loan term has lower repayments, as you now have five additional years to pay off the same loan amount. However, you'll also be paying interest for an additional five years.

Learn more about difference between a 25 and a 30 year home loan term

Generally speaking, home loan terms can include 10, 15, 25, 30 or even 40 year loan terms. 25 and 30 year loan terms are the most common, with 10 and 15 year loan terms generally being confined to interest-only repayments and 40 year loan terms only offered by a small number of lenders.

Choosing to take out a home loan with a 40 year term will have even lower repayments than a 30 year loan term—$1,805.20 on $350,000 loan with a rate of 5.50% compared to $1,987.26 with a 30 year loan term, or $2,149.31 on a 25 year loan term. It’ll also come with a much larger interest bill—$516,496 vs $365,413.60 on a 30 year loan.

Learn more about 40 year home loan terms

Even if you have a longer loan term, you may be able to make additional repayments or make use of repayment strategies which decrease your loan term. Making additional repayments or lump sum payments, or splitting your monthly loan repayment into fortnightly payments can see you pay your loan off in a shorter time period.

Refinancing mistake: refinancing to a lower interest rate and not adjusting your loan length

One mistake to avoid is refinancing to a cheaper interest rate and taking out a new 30 year term. This can erode your refinancing savings, as you can see below.

Original loan Refinance after 5 years
loan term 30 years 30 years (which means a real overall loan term of 35 years)
loan amount $300,000 $281,470
interest rate 6.70% p.a. 5.70% p.a.
monthly payment $1,936 $1,634
total interest payable $396,900 $404,266 ($306,645 in interest from the point of refinancing)
interest saving $7,365

* based on monthly, principal and interest repayments

Compare refinance home loans today

Rates last updated May 22nd, 2019
$
Loan purpose
Offset account
Loan type
Repayment type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.59%
3.55%
$0
$0 p.a.
80%
Low variable rate mortgage for owner occupiers looking to switch. Refinancers only.
3.59%
3.59%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
3.74%
3.78%
$0
$10 monthly ($120 p.a.)
80%
Get a competitive variable rate and a 100% offset account.
3.64%
4.63%
$300
$10 monthly ($120 p.a.)
90%
Low fixed rate loan for home buyers. Available with a 10% deposit. 100% offset account attached.
3.79%
3.82%
$445
$0 p.a.
90%
NSW and ACT customers only. Get a special discount for a limited time when you open an IMB Transaction Account.
3.73%
4.76%
$0
$0 p.a.
80%
Pay no application fees and access a fee-free redraw facility with this fixed rate loan.
3.59%
3.66%
$0
$0 p.a.
70%
Get a low interest rate and a mortgage with flexible, basic features. No application or ongoing fees. Requires a 30% deposit.
3.44%
3.59%
$600
$10 monthly ($120 p.a.)
70%
A very low variable interest rate for home buyers with a 30% deposit. This product has a 100% offset account.
3.99%
3.95%
$0
$0 p.a.
80%
A competitive variable mortgage for investors looking to refinance. Principal and interest repayments. Refinancers only.
3.69%
3.69%
$0
$0 p.a.
70%
A simple mortgage with no application or ongoing fees that has extra repayments plus split and redraw options. Requires a 30% deposit.

Compare up to 4 providers

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