How much it cost to smoke.

I think a packet of cigarettes costs about AUD15. For the sake of arguement the borrowers would be a couple and, as non-smokers couldn't possibly live with smokers (my bias), let's assume that both borrowers smoke.
Daily cigarette cost each $15
Weekly: $105
Per four weeks: $420
For two people: $840
This gives a figure of $840 per month. Really the average calender month figure is (105*2)*52weeks/12months = $910 but $840 is a more concervative figure so we'll run with it.

Then it is easy enough to work back to the initial principal amount that will repay using my Texas Instruments BAII Plus Calculator.

Payment: -840/month
Interest Cycle: Monthly
Term: 20 years/240 months
Interest rate: 10% (this is a good average home loan rate)

This gives a principal value of $87,044. This is the initial face value of the loan... the amount you have to spend at funding.

So, you can smoke or pay off a home loan of $87k. Obviously, $87k would not buy a house. But it could let you extend or substantially improve a house or buy a bigger/better house.

So, the other way. What happens if you increase the repayments buy $840 per month?

Loan: $350k
Interest rate: 10%
Term: 20 years/240 months
This gives a repayment of $3377 per month.
Interest paid over the term of the loan: $460,616

If this is increased by $840 per month the term will be shortened and interest will be saved.

Loan: $350k
Interest Rate: 10%
Repayment: $4,217 per month

This gives a term of 142 months, less than 12 years.
Total interest is reduced to $247,838 a saving of $212,778.

It is not uncommon for people to start piling money into superannuation once the principle place of residence loan is repaid. With superannuation being a product that gives the best advantage the sooner you start, the saving in time is just as important as the saving of money. Future investment plans may be more along the line of an investment property. It doesn't matter which investment is more to your taste, starting sooner is advantageous.

The Commonwealth Bank has a loan calculator to run numbers. This calculator gives a yearly principal and interest



(Disclaimer: If you are taking advice from blogs you are a goose! Go see a financial planer if you want advice. I'm just running numbers not giving advice. I like numbers.) :)