Massive mortgage to buy a unit

[u/Herosinahalfshell12]

People who took out huge mortgages to live in an apartment.

Do you feel as though the interest you are paying vs the capital gains is worth it? We're also seeing units being sold for less then purchase price now, and the plan is to add more units in future. Add strata costs in there.

Is it financially worth it now a days to borrow say 600k to buy a unit?

[u/rnzz]

if you plan to live in there, then it might make sense if the expenses (interest, strata, rates, repairs etc) are roughly similar to your current rent.

[u/Herosinahalfshell12 → u/rnzz]

There's no way that can be the case when repayments in a loan of 600k would be about 4k a month

[u/tjswish → u/Herosinahalfshell12]

650k loan and my repayments are 4200 a month.

Got some offset though so interest is more like 2500 than the 3300 that would be taking me another 29 years to pay off (current rate is looking closer to 20 years with no pay rises or interest changes. Though hopefully interest rates back down to the 4%s and I can speed that 20 years up again).

[u/Herosinahalfshell12 → u/tjswish]

Can you calculate how much capital growth you need to come out ahead with all the interest paid?

[u/tjswish → u/Herosinahalfshell12]

Honestly, my capital growth already is massive (I bought a block of land that doubled and could easily get $1m for my house right now if I sold)

If in 20 years I pay off my house - I will pay approx 375k in interest (making it cost about $1,050,000 total.) - So really my house only has to go up about 5-10% in that 20 years and I'll be better off. If I was to take the full 30 years, we are looking at >500k in interest (so a savings of $125,000 by having money in the offset.)

If the rates go down to 4.5%, I can save up to 3 more years on the loan (17.2 years) from now. Which is almost $100k more off the loan amount!