Do home loans over 40 years save you $$$?

A news article recently talked about the increase in home loans over a 40 year term.

A 40 year home loan might look attractive but do you know what this would actually mean? Would it save money? Lets look at a $300,000 loan:

• Repayments over 30 years - approx $1500 per month

• Repayments over 40 years - approx $1300 per month

That's a saving of approx $200 a month or $20,400 over the extra ten years. It can sound attractive but the real trap is in how much extra in interest you would have to pay.

• Interest over 30 years - approx $246,000

• Interest over 40 years - approx $347,000

That's almost a whopping $100,000 MORE in interest by choosing a loan term of 40 years.

If you take out the $20,000 that you would have saved, the extra 10 years could still cost you $80,000!!!

The lesson here is that if you pay your home loan down as quick as possible, you'll pay less interest.

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