This post is part of the fantastic “Ultimate Guide” series which aims to help any person, with any income and any number of children to easily see what type of time frames they should be aiming for regarding paying off their mortgage early.
- The Ultimate Guide To Paying Off Your $100K Mortgage
- The Ultimate Guide To Paying Off Your $200K Mortgage
- The Ultimate Guide To Paying Off Your $300K Mortgage
- The Ultimate Guide To Paying Off Your $400K Mortgage
Welcome!
Today we are looking at ALL the various scenarios for people with $400,000 mortgages. That being said there are quite a few so feel free to dig straight in and jump to the section that best describes you! We have various levels of income as well as various amounts of children representing 12 different possible combinations to choose from. Each permutation has a full worked example of how to calculate your specific scenario.
- Single $60K Income – No Kids / 1 Kid / 2 Kids
- Single $80K Income – No Kids / 1 Kid / 2 Kids
- Dual $60K Incomes – No Kids / 1 Kid / 2 Kids
- Dual $80K Incomes – No Kids / 1 Kid / 2 Kids
Also to keep things simple I’m going to define the Expenses here and just use them over and over in each scenario as they should be the same each time (obviously there are added costs for children). One of the key things to mutilating that mortgage is not letting your income define how much your expenses are!
| Gas: | $600 |
|---|---|
| House Insurance: | $1,000 |
| Internet: | $720 ($60 Per Month) |
| Power: | $1,000 |
| House Rates: | $1,000 |
| Water: | $800 |
| Food: | $7,020 ($125 Per Week) |
| Car Insurance: | $1,800 ($900 * 2 Cars) |
| Car Rego: | $1,440 (As Of 2016) ($720 * 2 Cars) |
| Car Petrol: | $4,160 ($40 Per Week * 2 Cars) |
| Car Services: | $1,000 ($500 * 2 Cars) |
| Mobile Phone: | $960 ($40 Per Month * 2 Phones) |
| Private Health Insurance: | $3,000 ($1,500 * 2 Persons) |
| Presents (eg. Birthdays): | $2,000 |
| Sports/Exercise: | $1,600 ($800 * 2 Persons) |
| No Kids: | $0 |
| 1 Kid: | +$400/fortnight |
| 2 Kids: | +$800/fortnight |
Total Expenses:
$28,100 or $1,080/Fortnight (No Kids)
$38,500 or $1,480/Fortnight (1 Kid)
$48,900 or $1,880/Fortnight (2 Kids)
Single $60K Income – No Kids / 1 Kid / 2 Kids
Income
According to the ATO’s Simple Tax Calculator as well as their Medicare Levy Calculator:
Total Income After Taxes: $47,753 or $1,836/Fortnight
The Mortgage
Obviously for these examples the mortgage is set at $400,000 at current interest rates of 4%.
The Budget
| Income: | Expenses: | Remaining: | Savings Rate: | |
|---|---|---|---|---|
| No Kids: | $1,836 | $1,080 | $756 | 41% |
| 1 Kid: | $1,836 | $1,480 | $356 | 19% |
| 2 Kids: | $1,836 | $1,880 | -$44 | N/A |
Looking up a quick repayments calculator we can see what type of loan term this couple should be expecting given this simple plan…
| No Kids: | N/A |
|---|---|
| 1 Kid: | N/A |
| 2 Kids: | N/A |
The Results
- With such a high mortgage and only one income, there are no combinations where this works unfortunately
- Even at the maximum 30 year term this level loan requires a minimum of $880+ remaining money per fortnight, preferably much more just in case bad time occur
As always this should also be used in conjunction with our piece on How To Pay Off Your Mortgage Faster and the Free Excel Mortgage Calculator with Amortization Spreadsheet for the most efficient and reliable results.
Single $80K Income – No Kids / 1 Kid / 2 Kids
According to the ATO’s Simple Tax Calculator as well as their Medicare Levy Calculator:
Total Income After Taxes: $60,853 or $2,340/Fortnight
The Mortgage
Obviously for these examples the mortgage is set at $400,000 at current interest rates of 4%.
The Budget
| Income: | Expenses: | Remaining: | Savings Rate: | |
|---|---|---|---|---|
| No Kids: | $2,340 | $1,080 | $1,260 | 54% |
| 1 Kid: | $2,340 | $1,480 | $860 | 37% |
| 2 Kids: | $2,340 | $1,880 | $460 | 19% |
Looking up a quick repayments calculator we can see what type of loan term this couple should be expecting given this simple plan…
| No Kids: | 17 Years |
|---|---|
| 1 Kid: | N/A |
| 2 Kids: | N/A |
The Results
- We’re starting to see that now even with the higher single income it still causes issues given how high this mortgage is reaching
- Whilst having no children makes it possible to pay off relatively comfortably, any extra increases in costs or new children will dramatically effect the loan term pushing the person into very dangerous territory
- Even at the maximum 30 year term this level loan requires a minimum of $880+ remaining money per fortnight, preferably much more just in case bad time occur
As always this should also be used in conjunction with our piece on How To Pay Off Your Mortgage Faster and the Free Excel Mortgage Calculator with Amortization Spreadsheet for the most efficient and reliable results.
Dual $60K Incomes – No Kids / 1 Kid / 2 Kids
According to the ATO’s Simple Tax Calculator as well as their Medicare Levy Calculator:
Total Income After Taxes: $95,506 or $3,673/Fortnight
The Mortgage
Obviously for these examples the mortgage is set at $400,000 at current interest rates of let’s say 4%.
The Budget
| Income: | Expenses: | Remaining: | Savings Rate: | |
|---|---|---|---|---|
| No Kids: | $3,673 | $1,080 | $2,593 | 70% |
| 1 Kid: | $3,673 | $1,480 | $2,193 | 60% |
| 2 Kids: | $3,673 | $1,880 | $1,793 | 49% |
Looking up a quick repayments calculator we can see what type of loan term this couple should be expecting given this simple plan…
| No Kids: | 6.8 Years |
|---|---|
| 1 Kid: | 8.3 Years |
| 2 Kids: | 10.5 Years |
The Results
- Again now with this higher mortgage level we’re starting to see the dual income couple start to take much longer
- Even with two children we’re still talking about quite low time frames here of around 7-10 years
As always this should also be used in conjunction with our piece on How To Pay Off Your Mortgage Faster and the Free Excel Mortgage Calculator with Amortization Spreadsheet for the most efficient and reliable results.
Dual $80K Incomes – No Kids / 1 Kid / 2 Kids
According to the ATO’s Simple Tax Calculator as well as their Medicare Levy Calculator:
Total Income After Taxes: $121,706 or $4,681/Fortnight
The Mortgage
Obviously for these examples the mortgage is set at $400,000 at current interest rates of let’s say 4%.
The Budget
| Income: | Expenses: | Remaining: | Savings Rate: | |
|---|---|---|---|---|
| No Kids: | $4,681 | $1,080 | $3,601 | 77% |
| 1 Kid: | $4,681 | $1,480 | $3,201 | 68% |
| 2 Kids: | $4,681 | $1,880 | $2,801 | 60% |
Looking up a quick repayments calculator we can see what type of loan term this couple should be expecting given this simple plan…
| No Kids: | 4.7 Years |
|---|---|
| 1 Kid: | 5.4 Years |
| 2 Kids: | 6.2 Years |
The Results
- No matter what scenario you choose it’s game over in about 5-6 years, still quite a fast time frame but the higher mortgage is now taking it’s tole even on dual high earners!
- Even this slightly higher than average loan size is no match for dual, high incomes and MTM’s strategy
As always this should also be used in conjunction with our piece on How To Pay Off Your Mortgage Faster and the Free Excel Mortgage Calculator with Amortization Spreadsheet for the most efficient and reliable results.
The benefits include: 1) How to pay off your mortgage faster than 99% of people with one hour a month of work 2) How to get rid of your debt and have the freedom to spend money on the things you love, guilt free 3) Clear outline of how to setup your expenses, mortgage and general finance 4) How offset accounts work and how to get the same result without being gouged by the big banks 5) How to cut through the crap and focus on the things that truly matter when taking down a mortgage 6) How to adjust the strategy so it works for you, even if you have kids, even if you only have one income 7) How to do all of these things and maintain a normal social life (and never be cheap).
