Why a typical Geelong home actually costs more than $1m

New research has revealed the true cost of buying homes in Geelong. Picture: Brad Fleet

---

The true cost of buying a typical home in Geelong is more than $660,000, or close to double the sticker price buyers think they’re paying.

Exclusive Finder research shows that after paying stamp duty and interest over the life of a 30-year loan, the actual cost is nearly double the price listed on the contract.

The analysis is calculated using the average 5.69 per cent interest rate on loans where buyers have either 10 or 20 per cent deposits.

RELATED: Blush Bar owner selling $5m Jan Juc dream home

AFL star’s huge property move after Carlton exit

Renovators nearly triple price of Geelong West home

The figures show owning a house outright costs more than $1.4m in 40 Geelong suburbs and towns, including once affordable spots like Hamlyn Heights and Herne Hill.

The Finder research found that for Geelong’s $720,000 typical house, a homebuyer paying out their mortgage over 30 years, and their stamp duty costs, will actually pay more than $1.38m.

Secondary analysis also revealed the sneaky hit that could be waiting first-home buyers who use the federal government’s recently expanded First Home Guarantee to purchase a property with a 5 per cent deposit.

Even purchasing a home at Geelong’s median house price even with a 10 per cent deposit a buyer would wind up paying $80,000 more over the life of their loan than those who saved 20 per cent before purchasing.

Mortgage Choice broker David Thurmond said the long-term cost was “the last thing” homebuyers were thinking about, but noted that very few people would go on to pay their mortgage over 30 years.

The three-bedroom house at 37 Yuille St, Geelong West, is listed for sale with price hopes from $949,000 to $999,000.

---

“You are not thinking you will pay $1.5m for an $800,000 home,” he said.

Most would instead pay it off earlier, or leverage equity to invest, and effectively change their loan situation a few years after taking it out.

While most of his clients were ahead of their mortgages, he said in many instances this was only by $5000 or $10,000 – though mostly because they were refinancing or investing the money elsewhere after a few years’ time.

Even a $50 a week extra payment on a mortgage adds up to $13,000 over five years, which could have meaningful impacts on long-term interest costs, he said.

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

Mr Thurmond said for those who swapped monthly repayments could knock about five years off of their mortgage without paying extra, due to the way interest cycles worked for banks.

Paying weekly could reduce a 30 year loan to 24 years.

“It’s definitely in the bank’s interest to have you pay monthly, but if you are paid weekly it makes sense to have the payment come out weekly,” he said.

Finder’s Richard Whitten

---

Finder home loan expert Richard Whitten said new buyers almost certainly underestimate the long-term costs of home ownership, especially insurance, maintenance, repairs and upgrades.

“But the upsides are really positive. Paying off the loan principal builds up your wealth, and the property value will most likely grow over time. And if you can pay the loan off faster those interest costs drop. Once the loan is paid off you’re in a substantially better position than a renter,” he said

Mr Whitten said the value in the first home guarantee scheme was getting buyers’ feet in the door earlier, before prices rise further.

“It’s not that using the First Home Guarantee Scheme costs you more in the long run. It’s the difference between borrowing 80 per cent of your property’s value versus 95 per cent,” he said.

Moneycat Finance chief executive Evan Davis said a lot of homebuyers never fully paid their loans, selling before the end of their 30 year mortgage.

But with the cost of living rising in recent years and interest rates still well above levels three years ago, it was now harder to get ahead for many families.

“So this generation of homebuyers might wind up having that same loan for a longer period of time than normal,” Mr Davis said.

With Nathan Mawby

The true cost to purchasing your Geelong home

Source: Finder. 30 year cost includes a 20 per cent deposit, 30 year mortgage repayments and stamp duty.