‘Interest is killing’: the real cost of homes in Hobart – realestate.com.au

Homebuyers will pay as much in interest and taxes as the sticker price of their home, an analysis of mortgage costs shows.

In Hobart, research by comparison site Finder shows that buyers of a house costing €715,000 with a down payment of €143,000 (20 percent) will pay more than €1,337 million in real costs over the term of a home loan of thirty years.

For some starters, the costs can be even more expensive.

The analysis shows Hobart buyers taking advantage of the federal government’s expanded First Home Guarantee – a 5 per cent down payment instead of 20 per cent – ​​would get an additional $114,152 over the life of the same $715,000 loan.

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Petrusma Property has 16 Montagu Bay Road, Montagu Bay for sale priced in excess of $695,000.

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No.8 Kotona St, Rokeby is for sale with Exceed Property at a price in excess of $745,000.

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For homebuyers with a 20 percent deposit, just nine of Hobart’s 66 suburbs would have a total cost of less than $1 million if paid in full over 30 years.

Once considered more affordable areas, Goodwood, Brighton, Mornington and Austins Ferry were all above the $1 million mark.

In Hobart’s cheapest suburb, Gagebrook, a house with an average price of $380,250 and a 20 percent deposit will cost $710,964 over a 30-year loan. With a 10 percent down payment, the actual cost increases to $752,304.

At the top of the table, Battery Point’s total cost was more than $3 million, while a median-priced Sandy Bay home worth $1.35 million would cost a total of more than $2.58 million.

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In Hobart’s suburbs, excise costs ranged from $29,666 to $66,060, with half of the suburbs analyzed falling below Tasmania’s rate cap of $750,000.

Home lending expert Richard Whitten said the huge long-term costs highlight the value of using an offset account or making extra loan repayments to bring down the debt.

“Interest kills,” Whitten said. “Real estate prices are so high that the interest most of us will pay over 30 years is astronomical.

“If Australians borrow $1 million to buy a house, a 7 or 8 percent interest rate could ruin them.

“If inflation rises again, interest rate increases will be politically very difficult.”

Finder’s Richard Whitten.

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Exceed Property director Mandy Welling said while Hobart’s first home buyers are making informed decisions, she is confident few use the full term of their loan when considering buying a home.

“There will be some analytical buyers who take that into account, but I am sure they are the exception and not the rule,” Ms Welling said.

“From our conversations with first-time buyers, it appears that they are more focused on breaking the rental cycle and hopefully securing something with which they can earn capital.”

No.164 Goulburn St, West Hobart is for sale with Peterswald, priced in excess of $725,000.

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Ms Welling said many young buyers have been thinking about what could go wrong if they struggle with repayments and are talking about ‘back-up plans’.

“This could mean taking on a roommate to help with the repayments, or possibly moving back in with mom and dad and renting out the house until they can make the repayments again,” she said.

“They are aware that their market is currently moving rapidly and competition is increasing with an influx of interstate investors creeping into the space,” she said.

Mandy Welling in Hobart. Photo: Chris Kidd

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Mortgage Choice broker David Thurmond said an extra $50 a week on a mortgage amounts to $13,000 over five years, which could have a significant impact on long-term interest costs.

“Over the life of the loan, that will save you thousands in interest,” he said.

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While first-time buyers will “almost certainly” underestimate the long-term costs of homeownership, Witten says the benefits are positive.

He said paying off the principal on a loan builds wealth, and a property’s value is likely to increase over time.

“If you can pay off the loan faster, those interest costs decrease,” he says.

“Once the loan is paid off, you are in a significantly better position than a renter.

“A debt-free 60-year-old homeowner can live without rent for 20 to 40 years, while a renter of the same age has decades more rent to pay.”