Is a 30-Year Mortgage Really That Scary? Let’s Break It Down Properly
This post follows directly from my last one — because I want to tackle something that freaks out a lot of people: the 30-year loan term.
You’ve probably heard the classic line:
“If you hold your loan for 30 years, you’ll pay as much in interest as the loan itself!”
Cue panic sirens, sweaty palms, and a sudden urge to live off beans and rice until the loan is gone.
But let’s slow this down. Let’s actually look at what’s happening, not in fear-based soundbites, but in real numbers that take the time value of money into account.
Because once you understand that, the whole picture shifts.
The Scary Headline: $1,022,000 Repaid on a $500,000 Loan
On paper, repaying ~$1,022,000 over 30 years for a $500,000 loan looks terrifying.
If you had to repay that amount today, it would be.
But 30 years from now?
It’s nowhere near as frightening.
Why? Inflation.
Inflation quietly erodes the value of money every year. So while the nominal repayment total might look huge, the real value — what it’s worth in today’s dollars — is very different.
And ironically, this hurts the bank, not you.
They lend you $500,000 today, but you’re repaying that amount (plus interest) over 30 years while the purchasing power of every dollar falls. Meanwhile, your income tends to rise, and your repayments become a smaller portion of your life.
Your loan effectively gets cheaper over time.
Your Real “Net” Interest Rate Isn’t What You Think
If your interest rate is 5.50% and inflation is running at 3.50%,
the real cost of borrowing is:
5.50% – 3.50% = 2.00% (net)
That’s the real bite of the loan. Not five and a half percent — two.
But let’s take this a step further.
Nerd Corner: What Is the True Cost in Today’s Dollars?
Using proper present-value calculations, the total $1,022,000 you’d pay over 30 years on that $500,000 loan boils down to:
$632,219 in today’s dollars.
So no, you are not “really paying a million dollars.”
Not in today’s terms.
Not even close.
And that alone should calm a lot of people down.
But here’s where things get interesting.
Property Growth vs Inflation vs Wages
Most people forget that while inflation erodes money:
Property values have outpaced inflation for decades
— roughly 6.4% per year across Australia over the last 30 years.Wages have also outpaced inflation over the same period.
So your mortgage becomes cheaper every year…
while your property and your income tend to grow faster.
You see where this is going.
Let’s Flip the Script (This Is Where People Go “No Way…”)
Imagine you buy a $600,000 home.
Growth at 6.4% p.a. over 30 years takes it to around $3,858,000.
Now strip out inflation and boil that back to today’s dollars.
The result?
$1,374,000 in today’s money.
So, using our earlier example:
Worst-case scenario, you repay $1,022,000 over 30 years.
Your home becomes worth $3,858,000 in nominal dollars.
Or $1,374,000 in today’s dollars and you’ve paid $632,219 in today’s dollars.
Suddenly paying that million back doesn’t feel like the bank “fleeced” you… does it?
What was that Barry?
“Mate, you sound off your rocker. That’s crazy talk.”
I bet people that bought in Mount Waverley and Glen Waverley for $100,000 back in the day said the same thing.
Yet here we are, many 12 - 15x their purchase price. I’ve seen those hold their properties for longer and experience a 30x. My example is only a 6x
This is not magic.
It’s not luck.
It’s simply the maths of compounding vs the maths of inflation.
It’s almost a form of slow, steady arbitrage.
“Oh yeah, well it’s all relative anyway mate”
Nice one Barry. That’s not what they tell you when you see those headlines of $1,022,000 to be repaid to the bank.
And is it relative? There is no comparison when we compare home ownership to rent over this time period.
This Is Why Perspective Matters
When you zoom out like this, it becomes incredibly hard to argue that the bank “wins” simply because you borrow over 30 years.
Could you pay it down faster? Yes.
Should you consider it? Of course.
But what I don’t love is the fear-based messaging that has people:
hyper-fixated on smashing down debt at all costs
sacrificing lifestyle or opportunities
locking all their wealth into a non-liquid asset
and feeling like they’re “failing” if they don’t clear their mortgage by 40
I’ve seen that path end badly more than once.
Instead, I prefer to walk people through the worst-case scenario and let them see, logically, objectively — that it’s not nearly as scary as it’s made out to be.
When you understand the real numbers, you make better decisions. Not fear-driven ones.
If you want clarity around your own borrowing options without the fear based noise, reach out. Use the contact form, or book a meeting and let’s walk through your numbers and map out your path to home ownership.
