How long should my home loan be?

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

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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.

But the longer the term, the lower your repayments will be every month. While a 30-year loan term costs you more by the end, the repayments are cheaper and more manageable every month. Most borrowers choose 30-year loan terms for this reason.

Length of mortgage comparison

Let's compare a 25 and 30 year mortgage.

Loan details25 Years30 Years
Loan amount$300,000$300,000
Interest rate6.70% 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.

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 loanRefinance after 5 years
loan term30 years30 years (which means a real overall loan term of 35 years)
loan amount$300,000$281,470
interest rate6.70% 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

$
years
Name Product Interest Rate (p.a.) Comp. Rate (p.a.) Fees Monthly Payment

Nano Variable Home Loans P&IHome≥ 25% Deposit Refi Only

Nano Variable Home Loans
1.99%
1.99%
  • App: $0
  • Ongoing: $0 p.a.
$555
Switch to this competitive variable rate with zero fees. Requires a 25% deposit.

Westpac Fixed Option Home Loan Premier Advantage Package P&IHome 2Y Fixed≥ 5% Deposit

Westpac Fixed Option Home Loan Premier Advantage Package
1.99%
3.48%
  • App: $0
  • Ongoing: $395 p.a.
$555
$3,000 refinance cashback
Lock in a low fixed rate for 2 years that allows you to make up to $30,000 in extra repayments and buy your home with a 5% deposit. $3,000 cashback for eligible refinancers. Apply by 30 September 2021. Terms and conditions apply.

HSBC Fixed Rate Home Loan Package P&IHome 2Y Fixed≥ 20% Deposit

HSBC Fixed Rate Home Loan Package
1.88%
2.86%
  • App: $0
  • Ongoing: $390 p.a.
$547
$3,288 refinance cashback offer
Lock in a low fixed rate for 2 years and buy your home with a 20% deposit. Eligible refinancers borrowing $250,000 or more can get a $3,288 cashback. Terms and conditions apply.

Suncorp Home Package Plus Fixed P&IHome 2Y Fixed≥ 20% Deposit

Suncorp Home Package Plus Fixed
1.89%
2.85%
  • App: $0
  • Ongoing: $0 p.a.
$548
$3,000 refinance cash bonus
Lock in a low fixed rate for 2 years. Available with a 20% deposit. Eligible new borrowers can get the annual package fee reimbursed for the life of the loan. $3,000 refinance cash bonus for eligible borrowers. Other terms, conditions and eligibility criteria apply.

loans.com.au Smart Booster Discount Variable Home Loan P&IHome≥ 20% Deposit

loans.com.au Smart Booster Discount Variable Home Loan
1.85%
2.21%
  • App: $0
  • Ongoing: $0 p.a.
$545
Get a low discounted variable rate loan. Requires a 30% deposit. Get your loan processed fast and settle within 30 days.