Taking the example of a $200,000 loan at 8% interest the following facts emerge:
Clearly, the shorter term is better and saves you money because you are paying more each month. However, in my view it is preferable to take the 30 year term. This provides you with maximum flexibility. If you can afford to make repayments calculated on a 25 year or lesser loan term then my advice is to be disciplined and make those extra repayments. This will repay your home loan faster, save you interest and also provide you with a safety net – the extra payments you make can generally be accessed as redraw should you require funds for any reason.
Related: Home Loan Calculator