TP's Top Tips- The length of a mortgage term and what it means for you.

For most people, when a mortgage is set up the banks will default to a 30-year loan term. This means that if you only pay the minimum repayments on your mortgage it will take you 30 years to pay off the whole loan. Makes sense, right?

The problem with this in some cases is that if you take 30 years to pay off your mortgage the total interest you pay over that time, can easily equal more than the amount of the loan itself. Meaning you effectively buy your house twice because you also must pay the loan principal (the amount you borrowed to start with).

So, what can you do to reduce this massive cost? Well if you can afford to increase your payments by a small amount like $30 per week you can pay your loan off in around 25 years instead of 30. This small change can save you tens of thousands of dollars over the whole mortgage term. Use a good mortgage calculator to see what the difference of $30 to $50 a week would do to the total interest and total term on your mortgage.

One advantage of using a good Mortgage Adviser is having the right advice on hand when you have to make this decision. We help you set up your mortgage structure correctly from the start so that you save money in the long run

This information is general in nature and does not constitute personal advice. It has been prepared without consideration of anyone’s individual financial situation, needs or financial objectives.  Formal personalised advice should be sought before acting on the areas discussed. The authors and distributors of this document accept no liability for any loss or damage suffered by any person as a result of that person, or any other person, placing any reliance on the contents of this document. Bank criteria regularly changes. Please contact your financial adviser for the most up to date information. A copy of our disclosure statements are available via our website www.duxfinancial.co.nz