The first automated payment to my home loan went through yesterday, along with the first interest charge. As one might reasonably expect, but I had not previously quite appreciated, in one fell swoop the interest charge wiped out around 85% of the payment. Were I a more emotional person, I might have screamed in anguish when I saw that on the screen in black and white. No wonder the bank fawn over me.
This ties in with what I’ve been told many times: the more dosh you can pay into the home loan, particularly in the early years, the better. A quick fiddling with a spreadsheet seems to indicate that if I can get an extra 50% onto it every month (which I would not expect to be particularly comfortable, but equally not impossible) I would be clear of the debt by 2019 (when I will be a spritely 49-year-old) rather than in 2033 (by which point I will be an aging 63-year-old).
Not only that, but the interest I would save would be (wait for this) in the region of a whopping two hundred and fourteen thousand dollars. It sounds just as impressive if I write it in numbers, look: $214,000.
Maybe I should eat bread and cheese for the next ten years.
Perhaps not. But it does make me think that maybe I’ll hold off on some of the less urgent purchases I had planned.
- Stove and oven — ancient, but workable. I might be willing to put up with them for a bit, postponing until a later but more thorough kitchen renovation is necessary.
- Surround-sound setup — who needs 5.1 speakers when you only have 2 ears?
- Kitchen table — bah humbug, the current one fits. Just.
- New desk — okay I’m torn here. The current one is pretty damn ugly, and really doesn’t suit the room at all.
- and filing cabinet — ditto. Though maybe I can hide that in the back room.
- Couch — No getting around this one. It direly needs replacing.
- Rugs — I wonder if it’s possible to get something not excessively horrible at one of those endless rug sales they keep advertising on the telly?
Actually, some of this stuff would be good to have soon. I’m sure there’s a balance to be found between spending up big and paying off the loan fast.
I’ve also got the income protection people chasing me with a proposal. I have to admit that the prospect of money for my kids if I fall under a 703 is inviting, though the premiums aren’t. After all, if the worst happened, they’d get my (fairly healthy) superannuation, right? The key would be to ensure that the house increases in value, so they wouldn’t also get saddled with a big debt.
Tell you what, I’ll be getting my bond back from the old place in a few days. As soon as that lands in my bank account, it’s going straight on the home loan.