eChoice Home Loans

The quicker you repay, the less you pay. But a shorter term isn't always necessary.

With a home loan, time really is money. For many home owners, paying off the home loan is their top priority. Most take a 25 or 30 year loan and work hard to clear their mountain of debt quickly. But which one is right for you?

30-year loan

The longer the loan term, the smaller the repayments. But what you save today, you pay in extra interest later. Extending your loan by five years can add thousands to the total cost of the loan. It also takes longer to build equity in your home. Consequently, 30-year loans are recommended for people who want low monthly repayments or who would not qualify for higher repayments.

25-year loan

This is the standard loan term in Australia and is designed to correspond with an average person's peak earning years. The repayments are slightly higher than a 30-year loan but the total cost of the loan is cheaper.

15-year loan

Cutting the term of your loan is one of the surest ways to save on interest and build equity quickly. As the payments on shorter loans are significantly higher, they suit people with higher incomes or older borrowers.

Tip: Lenders will consider your age when setting the loan term. Older borrowers may be forced to take a shorter term loan and pay it off before they retire.

What your home loan costs (based on a $100,000 loan at 6.5 per cent)
Term		Monthly repayment		Total interest paid		Total cost of loan
30 yrs		$632		$127,544		$227,544
25 yrs		$675		$102,562		$202,562
20 yrs		$746		$78,938		$178,938
15 yrs		$871		$56,799		$156,799

When choosing a loan, remember that a longer term will make adjusting to higher interest rates easier. Because your repayments are smaller to begin with, the difference in your lifestyle will be less when interest rates, and repayments, go up. And if you've chosen a loan that allows it, you can always reduce the amount you owe by increasing your payments or making extra repayments when finances permit.