The prospect of buying a home can put butterflies in your stomach and get you all giddy on the inside. That’s all good! You just want to make sure you’re not making big decisions based on emotion and nothing else.
To help bring some logic into the mix, consider one of the most important attributes of your home loan - your home loan repayment period, or loan term. Some due diligence on loan terms could mean thousands saved on interest costs or securing lower monthly payments that make a better fit with your budget.
Here’s a summary of common loan terms and how they can lead to different scenarios when paying off your loan.
Common loan terms or repayment periods
A loan term is the length of time it takes for a loan to be completely paid off – assuming you make regular repayments over a period of years.
The longest home loan you can have with Suncorp Bank is 30 years while the shortest loan period you can apply for is 8 years. If the loan purpose is for land only which is to be held as a long-term investment, then the maximum loan term cannot exceed 20 years.
A comparison of long term vs short term loans
In general, the longer your loan term, the lower your monthly repayments. Just remember, with a longer term loan, you’re also likely to pay more interest overall compared with a loan with the same rate and fees, over a shorter term.
A few extra years of repayments can make a big difference to the overall amount of interest you pay, as you can see in the following example.
Example: Comparing a 25-year home loan with a 30-year home loan^
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Above are two hypothetical examples only based on monthly, principal and interest repayments. The loan amount and interest rates are the same for both. Only the loan terms vary. The example is based on an interest rate of 3.00% per annum for 25 and 30 years, however, interest rates will vary over the life of the loan and therefore the potential interest saving will change and cannot be guaranteed. Currently, a fixed interest over a 25 year or 30 year loan is not available.
Choosing a 25-year term may mean an extra $263 in monthly repayments compared with a 30-year loan, but it saves $47,570 in total interest.
Of course, a 30-year loan could be a better fit for your budget or financial goals. It all depends on your personal situation and your repayment capacity.
Use the Suncorp Bank Home Loan Repayment calculator to see how much you might pay for different loans and terms. You can use the calculator to plug in other attributes of a home loan like payment frequency, interest rate and an option to select principal and interest payments or interest only.
Chat with a lending specialist to learn more about what could be right for you
Talk to one of our home loan experts about any home loan question, large or small. All consultations are 100% obligation-free.
Published 16 August 2022
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Home Loan, Personal and Business Banking products are issued by Suncorp Bank (Norfina Limited ABN 66 010 831 722 AFSL No 229882 Australian Credit Licence 229882) to approved applicants only. Eligibility criteria, conditions, fees and charges apply and are available on request. Please read the relevant Product Information Document and terms and conditions before making any decisions about whether to acquire a product.
The information is intended to be of general nature only. We do not accept any legal responsibility for any loss incurred as a result of reliance upon it – please make your own enquiries.
^All calculations assume that interest rates remain unchanged over the life of the loan, any change to the above factors including the interest rate will result in a change to repayment amounts and estimated interest saving
No fees or charges have been factored into the above calculation. Please refer to Lending Fees and Charges for all applicable fees.
