You may think paying $47,755 for a cup of coffee is ridiculous. I’m about to prove to you that this is exactly what it costs if you’re not taking control of your home loan.
Let’s assume you have a $350,000 home loan on a 30 year term at an interest rate of 5.0%. Your monthly repayments would be $1999.
Over the life of the loan, you will pay back $676,440. That’s a whopping $326,440 of interest to your bank.
Like everyone else, you like your daily cup of coffee. At an average price of $4.00, over the period of a month you will spend $120 on your caffeine fix.
If we assume that you can find another way of getting your caffeine fix and instead choose to pay that $120 coffee money into your home loan, an amazing thing happens. The total amount of interest you pay over the life of the loan reduces by $47,755. Plus, as an added bonus you reduce the term of your loan by almost four years.
If you’re slightly more extravagant and buy your lunch each work day ($10/day) plus buy a coffee each day, here’s a bigger surprise. If this spending was paid into your home loan, you save $123,668 of interest and reduce your loan term by just over ten years.
Food for thought…
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