Is your coffee habit adding years to your mortgage pain?
It’s smooth, it’s delectable, and it might just be adding years to your mortgage pain. The culprit? Your daily cup of joe.
A morning coffee has long been a ritual for many Australians – a ritual that used to take place over breakfast in the comfort of our own homes.
But with the rapid pace of modern life, and the plethora of hip coffee options available around our workplaces, more and more Australians have succumbed to the lure of the take-away coffee.
This might seem innocent enough, but those coffees really add up.
By finding an alternative, you could shave years off your mortgage and save thousands in interest repayments. Don’t believe us? Read on.
But I love my coffee! What are my options?
We’ve had a look at the relative cost of different coffee options, both on a monthly basis and over the course of five years. The results may surprise you.
Option 1: Takeaway coffee
Regardless of whether you’re getting a long black, latte or cappuccino, chances are you’re spending at least $4 a day, not to mention contributing to landfill with all the paper cups.
Upfront cost: Nil
Price of coffee: $28/week = $121/month
Cost over five years: $7,280
Option 2: French Press or a Moka Pot
These days the coffee you drink is as much an expression of your personality as it is about the taste.
So why not switch to a chic little French press or an Italiano moka pot?
For under $100 you can get a classy little table piece that will deliver a perfect cuppa time and time again.
Upfront cost: $60
Price of beans: $5/week = $22/month
Cost over five years: $1,380
Option 3: Capsule coffee machine
Oh the joy of a capsule espresso. Just as smooth as your local café, at a fraction of the cost.
The bonus is these days capsule machines also come with high quality milk attachments – perfect for those who prefer their coffee with slightly less bite. However for the environmentally conscious, this probably isn’t the best alternative.
Upfront cost: $500
Price of capsules: $5/week = $22/month
Cost over five years: $1,820
Option 4: Instant coffee
The stalwart of workplace kitchens across Australia, a cup of powdered Nescafe might not be everyone’s idea of a sophisticated beverage, but when the mid-afternoon slump hits it can really do the trick.
We are talking about budgeting here after all, and there is definitely no cheaper way to get your caffeine fix.
Upfront cost: Nil
Price of powdered coffee: $1/week = $4.30/month (or free if you can find it in your workplace)
Cost over five years: $260
What is the impact?
Ok, so now we have the basic costings, let’s see what these options really mean for your mortgage.
According to the 2016 Census, a typical Australian is in their late 30s, married with two children, and paying off a mortgage with their spouse.
Let’s assume this couple lives in the city, where the average new household loan is $374,900 and monthly repayments are $2,586/month, at an interest rate of 4%.
Let’s also assume they are also both drinking a cup of takeaway coffee per day, so spending $242/month on caffeine.
At this current rate, they will pay off their loan in 16 years and 8 months at a total cost of $516,044.
How much could they save if they switched from takeaway to another option?
French Press/Moka Pot
A saving of $198/month means the couple could increase their repayments to $2784/month.
This means they could pay their loan off in 15 years, at a total cost of $501,078. That’s a saving of 1 year 8 months, and $14,906 (deducting the cost of the coffee pot).
Capsule coffee
Like the French Press, a couple could save $198/month, meaning the couple could increase their repayments to $2784/month.
This means they could pay their loan off in 15 years, at a total cost of $501,078. That’s a saving of 1 year 8 months, and $14,466 (deducting the cost of the machine).
Instant coffee
A saving of $233.4/month means the couple could increase their repayments to $2819.4/month.
This means they could pay their loan off in 14 years 9 months, at a total cost of $498,764. That’s a saving of 1 year 11 months, and $17,280.
That’s just a drop in the cup
Of course coffee is just the tip of the iceberg. There are many other techniques you can employ to help pay off your mortgage much faster.
So give us a call on 07 3911 1190 and we’ll help you come up with a plan that will aim to shave a couple more years off your mortgage and help reduce that mortgage pain.