Loan repayments on a $1 million loan: How much would that cost a month?

So you’ve found your dream home and it means you’ll have to borrow $1 million. How much is that going to cost you in monthly repayments? And how can you make sure that you don’t pay too much? We take a look.

The median house prices in most parts of Australia have been tracking upward over recent years, although the COVID-19 pandemic is risking putting a dint in that growth pattern. However, it’s not hard to find a house to buy that requires a million dollar loan – particularly if you live in a capital city. For example, Realestate.com.au data showed that there were 209 suburbs across Sydney, 119 suburbs in Melbourne and 23 suburbs in Brisbane that had a median house value of more than $1 million (as of July, 2020).

It’s a substantial amount of money – so, how much would it cost to repay a $1 million home loan? Canstar has crunched the numbers, and the findings reveal how important it is that borrowers look to take advantage of the competitive home loan deals now on offer.

Repayments on a $1 million home loan

Home loan rates have never been so low, but there is still a big difference between what interest rates are on offer across the market. At the time of writing, there is a 3% difference between the highest and lowest variable rates on the Canstar database.

The below table illustrates what difference that could make to a $1 million variable-rate home loan.

Monthly Repayments and Interest Costs of a $1,000,000 Loan (Owner-occupier, P&I)
Rate Monthly Repayment Total Interest Paid
Lowest Variable Rate 2.39% $3,894 $401,932
Average Variable Rate 3.42% $4,446 $600,527
Highest Variable Rate 5.39% $5,609 $1,019,264
Difference between Highest and Lowest 3.00% $1,715 $617,332
Source: www.canstar.com.au – 9/07/2020. Based on variable owner-occupier loans available for a loan amount of $1,000,000, at 80% LVR with principal & interest repayments; excluding introductory and first home buyer-only loans.  Repayment and interest calculations assume a total loan term of 30 years and that rates remain the same throughout that time. Fees not taken into account.

Lenders have not just been changing their variable rates, however – fixed rate loans have reached new interest rate lows, too. At the time of writing, there were fixed rates available at less than 2%.

It is important it could be for a value-seeking borrower to consider the overall package of the home loan that is on offer, including the fixed rate term’s interest rate, and what that interest rate reverts to after the end of that fixed term (or at the conclusion of any introductory period).

To work out what repayments could apply to your loan, use Canstar’s mortgage repayment calculator.

This article was reviewed by our Sub-editor Tom Letts before it was published as part of our fact-checking process.

 

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