Thanks for Nuttin’, Albo

Scott,

I think I know your answer but I’ll ask it anyway. I’ve just been reading that in the US Trump is bringing in 50-year loans to help people get into their first homes. I’ve googled it and found that some banks here will do 40-year loans, which would help lower our repayments. Given all the homes we’ve been looking at around Albany have increased in value by $20,000 (or more) since the 5% deposit scheme was rolled out, is this worth looking at?

Tim

Hey Tim,

You’re right, you know my answer.

Don't take financial advice from a bloke whose businesses have been bankrupt six times.

Yet I get it. You scrimp and stash away $350 into your little savings account, and in one weekend house prices jump $20,000, thanks to an elbow from Albo. That completely sucks. Yet what sucks even harder is signing up to a 40- or 50-year loan. It’s literally a death trap: the average first-home buyer is now 38 years old. That means you’ll be making payments at 88. Yet most Aussie blokes are dead by 84!

Let's say you take out a $600,000 loan on a 50-year term. Your repayments will be much lower than a conventional 30-year loan. However, there’s no free lunch. You’ll end up paying $600,000 extra in interest to the bank.

Here’s you: “Yeah, but I’m not a loser, I’ll pay it off early, and all I care about is getting in, and the next 10 years.”

Here’s me: In the first 10 years of that 50-year loan, you’ll pay $353,000 in interest while only reducing your principal by a teeny, tiny $26,000. You’re basically renting from the bank while being responsible for all maintenance, rates and insurance.

Politicians can smell your desperation.

They’re hoping you don’t do the calculations.