Interest. A word that brings joy to bankers everywhere ?
Interest is the cost of borrowing money. The bank gives you a certain amount of money, and you agree to pay them back, with a little extra included – that’s the interest.
Let’s say you’re borrowing $500,000 from the bank to buy that perfect house with a big yard, lots of room and the perfect kitchen (not in Sydney of course). The bank agrees to give you that $500,000 now, and you agree to pay it back over 30 years, with interest.
Assuming an interest rate of 5.20%, over 30 years, you’ll end up paying approximately $488,400 just in interest!
Loan amount: $500,000
Total paid back over 30 years: $988,400