How much will your mortgage really cost?

Even if home loan interest rates are low, your mortgage can still cost you plenty of money over time.

One of the main determining factors of the cost of your mortgage is the interest rate. Even though home loan interest rates are comparatively low at the moment, a mortgage can end up costing you a lot of money in repayments and fees over 25 or 30 years.

Average cost of a 25-year standard variable mortgage

The average cost of a 25-year variable mortgage on a loan of $300,000 at the current average standard variable interest rate on Canstar’s database of 4.42% (as of 24/01/2018),  is $1,103 per month. The ultimate dollar cost of your mortgage can be calculated as follows using Canstar’s Mortgage Repayment Calculator:

Cost of a mortgage over 25 years at 4.42%
Loan size Monthly repayment Total cost
$200,000 $1,103 $330,781
$300,000 $1,654 $496,171
$400,000 $2,205 $661,562
$500,000 $2,757 $826,852
$600,000 $3,315 $992,343
Source: www.canstar.com.au. Based on a loan taken over 25 years excluding fees. The current interest rate is based on the average standard variable rate of 4.42% on Canstar’s home loan database as at 24/01/2018.

The total costs calulated above are based on the assumption that interest rates will remain constant. With rates currently at historical lows, it is realistic to assume that interest rates will rise over the term of the loan, resulting in a higher total cost. As an example of how comparatively low interest rates compare to higher interest rates, below is the cost of a mortgage over 25 years at an interest rate of 7%.

Cost of a mortgage over 25 years at 7%
Loan size Monthly repayment Total cost
$200,000 $1,414 $424,068
$300,000 $2,120 $636,101
$400,000 $2,827 $848,135
$500,000 $3,534 $1,060,169
$600,000 $4,241 $1,272,203
Source: www.canstar.com.au. Based on a loan taken over 25 years excluding fees.

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Average cost of a 30-year standard variable mortgage

Using a 30-year term at the current average standard variable interest rate on Canstar’s database of 4.42% (as of 24/01/2018), the ultimate dollar cost of your mortgage can be calculated as follows using Canstar’s Mortgage Repayment Calculator:

Cost of a mortgage over 30 years at 4.42%
Loan size Monthly repayment Total cost
$200,000 $1,004 $361,399
$300,000 $1,506 $542,098
$400,000 $2,008 $722,798
$500,000 $2,510 $903,497
$600,000 $3,012 $1,084,197
Source: www.canstar.com.au. Based on a loan taken over 30 years excluding fees. The current interest rate is based on the average standard variable rate of 4.42% on Canstar’s home loan database as at 24/01/2018.

As outlined below, the slightly lower monthly repayment on a 30-year loan term comes with a fairly significant total cost increase over the life of your mortgage:

Cost of 30-year mortgage compared to 25-year mortgage at 4.42%
Loan size Difference in monthly repayment Additional overall cost
$200,000 -$99 $30,618
$300,000 -$148 $45,927
$400,000 -$197 $61,236
$500,000 -$247 $76,645
$600,000 -$303 $161,854
Source: www.canstar.com.au. Based on the difference between a loan taken over 25 years and 30 years excluding fees. The current interest rate is based on the average standard variable rate of 4.42% on Canstar’s home loan database as at 24/01/2018.

Your mortgage is quite possibly the largest debt you will ever have, with no taxation benefits attached. It makes sense to try and pay it off sooner rather than later, as well as to ensure that you are getting the best value for money possible.

Average monthly mortgage payment

According to research from Commonwealth Bank in 2017, average monthly mortgage payments in Australia’s capital cities range from $1,500 to over $3,000. Sydney has the highest average monthly repayment ($3,031) and average loan size compared to other capital cities.

The lowest average monthly repayments can be seen in Hobart ($1,587) and Adelaide ($1,971), with the remainder of the capital cities ranging between $2,000 and $3,000.

Commbank stats 2017
Source: CBA, 2017.

Compare Home Loans with Canstar

If you’re currently considering a home loan, the comparison table below displays some of the variable rate home loans on our database with links to lenders’ websites that are available for first home buyers. This table is sorted by Star Rating (highest to lowest), followed by comparison rate (lowest-highest). Products shown are principal and interest home loans available for a loan amount of $350K in NSW with an LVR of 80% of the property value.

Before committing to a particular home loan product, check upfront with your lender and read the applicable loan documentation to confirm whether the terms of the loan meet your needs and repayment capacity. Use Canstar’s home loan selector to view a wider range of home loan products.

*Comparison rate based on loan amount of $150,000 and a term of 25 years. Read the Comparison Rate Warning

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