from enableMe Tauranga
When you celebrate a birthday that has a zero at the end of it, people reassure you it’s the new 30! Be it 40, 50 or 60 – they’re all the new 30.
But according to Hannah McQueen of enableMe, 10 is the new 30 when it comes to your mortgage. Too often borrowers default to the standard 30 years, trudging along and never making much more progress than that.
Over 30 years you could pay almost three times what you borrowed back to the bank. For example, on a $400,000 loan, you’ll pay back close to $1.1 million in interest (using long term average rates).
One of the problems is we don’t have a good gauge for what we should be aiming for – what’s a reasonable timeframe to pay off a mortgage?
You might think being 10 years away from being mortgage-free is impossible, but if you have debt that is four times your household income, you should be able to pay your mortgage off in eight years.
It it’s five times your household income, you should aim for 11-12 years. If that ratio is one to eight or nine, you’re overstretched and it’s time to sell.
There is always more fat in people’s budgets than they realise, and on average people fritter 15 per cent of their income on things they can’t account for.
Ten absolutely is the new 30, and having a plan to make it a reality will jumpstart you on the road to financial success.