Why Australian’s shouldn’t accept a 25-30 home loan

Don’t let a home loan tie you down for life

For most young people starting out on their life’s journey, it feels as if there are two options: save like your life depends on it so you can eventually afford a small home, then gradually build up your equity over many years until you can buy a family home, or don’t.

Of course, there are the exceptions.

The wealthy who can buy and sell real estate with hardly a second thought.

Those who are happy renting and not fussed by moving around at the whim of landlords.

The ‘kidults’ who never want to leave the family home and would sooner wait until they can put their folks into retirement living and start enjoying their ‘inheritance’.

And a few other cohorts with other priorities and sensibilities, perhaps travelling the world and working overseas before settling down back home in Australia, or something like that.

But, for the time being, the great Australian dream remains owning your own patch, where you can look at the four walls from inside or out and think: “that’s mine”.

Rethinking the Great Australia Dream

The majority of Australians still think like their parents and grandparents did. If I own a home, I’m set.

So, you and many of your friends are probably resigned to spending a significant portion of your lives saving up for a deposit so that you can purchase a 20, 25, or 30-year mortgage – and, of course, the corresponding bricks and mortar (and maybe some land around it).

If it’s not hard enough to save a deposit, to actually secure the loan you need from any financial institution means being able to demonstrate that you have a stable income.

That, in turn, ties you to spending most of your waking hours trading your time and energy for money, either in a nine-to-five-type job or a business of your own (meaning much more than a nine-to-five commitment).

Following that time-honoured path is likely to find you at or near retirement having spent the best years of your life paying off the loan which has enabled you to live in a place you can call home.

Where does that place all of your other hopes, dreams, and aspirations? Will you be able to also afford the lifestyle you’d like to choose, with travel, experiences, giving more to charities, investing, and so on?

There’s no denying that owning your own home is a beautiful thing for you and your family, and a noble goal to have. But is there a better way than tying your hard-earned income to your home ownership for three decades of your prime years?

Don’t the banks structure loans this way because it makes sense?

No doubt some people do have few alternatives but for the rest of us, why are we so willing to commit to a 25-year mortgage? Is it simply because we’ve been told that it’s the norm?

More than likely, we’ve been influenced by the fact that this is the way most banks and similar lenders package it. Not only can it be difficult to find out about other options, but there are also often extra hurdles to jump if you are considering straying from that well-worn path.

But it’s worth keeping in mind that all financial institutions are businesses, first and foremost. They exist to make profits for their shareholders, not to magnanimously offer you what suits you best.

In other words, just because a bank tells you a 25-year mortgage is right for you, that doesn’t mean it is. In fact, maybe it really means exactly the opposite!

We firmly believe that every Australian can, and should aim to, pay off their home loan within 10 years.

Yes, that’s right. It can be done in 10 years. So why wouldn’t you?

Don’t settle for the norm, waking up in your 50s or 60s and still yet to make that final payment to own your home outright.

You can move the goalposts and fast track the loan-repayment phase of your life so that you’re ready to move on to another chapter while still in your 30s or early 40s.

Imagine being freed up to do the things conventionally reserved for people in their golden years.

Whether your dream is to start giving a bit back to the community, assisting your children with a strong financial foundation, or leaving a decent legacy, the sooner you get that mortgage paid off, the sooner you can do what you really want.

Home ownership within 10 years – easier said than done?

We appreciate that the idea of paying off your home in 10 years sounds daunting. Surely the only way is by sacrificing and compromising lifestyle choices, and potentially having all of your finances squeezed? If it was easy, wouldn’t everyone be doing it?

Perhaps so, but don’t make the mistake of thinking it’s really difficult.

It’s all about being smart with money, so that your money is working alongside you to improve your position, rather than just being funnelled directly to the bank.

It’s not simply zealously saving every cent and denying yourself the things that make life the journey it should be.

Everyone wants to be able to afford dinners out, movie nights, and decent holidays, and we don’t think anyone should have to deny themselves those simple pleasures just to pay off their mortgage more quickly (or at all).

It really is as simple as putting your money to work, using common and readily available financial vehicles to compound your savings.

Rather than earning just to pay the interest on your loan and your everyday living expenses, we can help you use what you earn to keep earning, before making bigger regular payments.

By restructuring your finances, altering your roadmap, and realigning your cash flow, it’s actually not all that hard to change the balance so that you can enjoy both wealth creation and lifestyle.

If you want to explore the possibility of paying off your home in 10 years, we invite you to book a discovery call now. Who knows – maybe you’re only one conversation away from a completely different financial outlook within a decade!