25 vs 30 Year Home Loan: How Much More Interest?

The short answer

On a $600,000 loan at 6% p.a., a 30-year term costs roughly $135,000 more in total interest than a 25-year term (about $695,000 vs $560,000). You pay roughly $269 less each month on the 30-year loan ($3,597 vs $3,866), but you make 60 extra payments and the interest compounds for five more years. A longer term lowers the monthly repayment and raises the lifetime interest, and those two facts always travel together.

How loan term works in Australia

A home-loan term is how long you have to repay the debt. In Australia most lenders offer terms up to 30 years, with 25 years a common alternative; some lenders now offer 40 years. The term feeds directly into the standard principal-and-interest (P&I) repayment formula, where a longer term spreads the same principal over more periods.

Two things change when you stretch the term:

• Lower repayment. More periods means each one carries a smaller slice of principal, so the required monthly payment falls. This can help serviceability.
• More interest. Interest accrues on the outstanding balance every period. A longer term keeps the balance higher for longer, so total interest rises, usually by far more than the per-month saving suggests.

The term does not change your interest rate. Rate, term and loan size are three separate levers. For a deeper look at one loan size, see total interest on a $600k home loan over 30 years.

Worked example: $600,000 at 6% p.a.

Using True Loan's true-periodic P&I maths, monthly repayments, for a $600,000 loan at a 6.00% variable rate held flat for the life of the loan:

Term	Monthly repayment	Total repaid	Total interest
25 years	~$3,866	~$1,159,700	~$559,700
30 years	~$3,597	~$1,295,000	~$695,000
Difference	-$269/month	+$135,300	+$135,300

So the 30-year term frees up about $269 a month in cash flow, but over the life of the loan you hand the lender roughly $135,000 more in interest. (Total repaid and total interest differ by exactly the $600,000 principal in each row, so the maths is easy to check.)

A useful way to read this: the per-month saving of $269 is real, but the 30-year loan runs for 360 payments instead of 300. Those last 60 payments alone come to ~$216,000, and most of the early difference is interest, not principal.

These figures assume the rate stays at 6% the whole time. In reality variable rates move, so True Loan lets you model rate changes and fixed→variable rollover and the comparison reflects your actual structure.

Model this in True Loan

Open the True Loan calculator and enter your loan amount, interest rate and repayment frequency, then:

1. Set the Loan term to 25 years and note the total interest and monthly repayment.
2. Change the term to 30 years and compare.
3. Or use the side-by-side comparison tool to see both terms at once, each shareable via URL.

If you like the lower 30-year repayment but want to avoid the extra interest, you don't have to choose a shorter term. Two separate True Loan inputs replicate the effect:

• Extra repayment ($/month). Adding the ~$269 difference back as an extra payment on the 30-year loan pays it down on a similar trajectory to the 25-year term, while keeping the required payment low for flexibility. See extra per month to pay off your mortgage in 20 years.
• Offset balance. A sustained balance in the dedicated Offset balance input reduces the interest-bearing balance and can clear the loan early, separately from any extra repayment.

These are two distinct fields; set whichever matches your plan, or both.

Common questions and mistakes

Is a 25-year loan always better? It is a trade-off rather than simply better or worse. A shorter term saves interest but raises the minimum repayment, which affects how much you can borrow and your monthly budget. This is general information, not a recommendation.

Can't I just make extra repayments on a 30-year loan instead? Yes. A 30-year loan with consistent extra repayments can match a 25-year payoff while keeping the lower required payment as a safety buffer. The flexibility is the difference.

Does a longer term mean a higher interest rate? No. Term and rate are independent. A longer term costs more total interest purely because the balance is outstanding for longer.

What about a 40-year term? It lowers the repayment further and raises total interest even more. See 40-year vs 30-year home loan total interest.

Does refinancing reset my term? Often yes: a new 30-year loan restarts the clock, which can quietly add interest even at a lower rate. Model the remaining term, not a fresh 30 years.

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Figures are estimates generated by True Loan's calculator and depend on your rate, term and repayment frequency. They are general information only, not financial or credit advice. Check current rates with your lender and official sources such as moneysmart.gov.au.