ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Home Mortgage Interest - What Impact Does One Percent Have?

Updated on July 5, 2011

Buying a home and taking out a home loan is probably the biggest finance and money decision any of us make. Making such a large purchase usually necessitates getting a mortgage or home loan to make up the shortfall between the deposit we have available and the price of the property.

During the process of obtaining a mortgage, there is a raft of new information purchasers need to become aware of, especially if it’s a first home and first mortgage.

The technical terms, interest rate options, life insurance requirements and lawyers can be bewildering.

Here is some information on the rate of interest and the impact of one percent over the term of the loan.

One percent doesn’t sound much does it?

Yet this 1% can, over the life of the mortgage make the difference between slaving over work for years longer than necessary to pay the interest cost or paying off your mortgage and enjoying several holidays.

Judicious selection and monitoring of your mortgage can mean the difference between paying off your mortgage earlier so you are wandering around Sydney's great markets or taking that dream trip to cruise the world heritage site Halong Bay.

Mortgage Repayments and Home Mortgage Interest Rates

The following table shows the impact of the difference in home mortgage repayments when you pay 5% interest per annum versus 6% per annum.

  • For a $300,000 loan your monthly repayments will be $1,699 for a 5% mortgage rate.
  • If the rate is 6%, then the repayments are an extra $189 each month or over $2,000 annually.

Over the term of the loan is where the impact is the most dramatic. This table shows the amount of interest paid over 30 years. The extra one percent paid in interest alone on a $300,000 home loan amounts to a whopping $67,748. Now I imagine you could have a few nice holidays on that amount of money!

The above information is a guide.

When The Interest Paid is More than the Initial Purchase

The impact of the additional one percent home mortgage repayments is most dramatic if a mortgage of $500,000 at 6% is taken out. Over thirty years the purchaser is likely to pay for the cost of the home more than twice - once for the bricks and mortar and once to the bank!

The reality is that few of us stay in our homes for over 30 years and so mortgages are changed. Interest rates change too. Sometimes they are lower that those shown in the table and sometimes higher - even considerably higher. What's important is to take out the minimum mortgage you need, shop around for a good deal and pay it off as quickly as you can.

Even changing your repayments from monthly to fortnightly will have a noticeable impact on the time taken to repay the debt and the total amount of interest paid. So too will paying more than the minimum amount.

That's financially smart.

And finally......

This hub is copyright Travelespresso.  Please do not copy.

Writers love feedback so please leave a comment, rate my article and/or pass it on.  Thanks!

working

This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://corp.maven.io/privacy-policy

Show Details
Necessary
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
Features
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Marketing
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Statistics
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
ClickscoThis is a data management platform studying reader behavior (Privacy Policy)