Mortgage Repayment Calculator

A principal-and-interest repayment is set so that it never changes, and so that the last one clears the loan exactly. Each repayment first pays the interest charged since the one before; whatever is left reduces the balance. Because the interest is worked out on the balance, it is largest at the start and shrinks as the loan does, so the principal share of the same repayment grows every month.

On a $600,000 loan at 6% over 30 years the repayment is $3,597.30 a month. The first one is $3,000 of interest and only $597.30 of principal. Keep it up for the full term and you repay $1,295,029 — the $600,000 you borrowed and $695,029 of interest on top.

Choose weekly or fortnightly above and the calculator shows the repayment a lender would schedule for that frequency: $829.58 a week or $1,659.50 a fortnight on the same $600,000 loan. Over 30 years those cost almost exactly what monthly repayments do, because they are the same loan divided into smaller pieces.

The saving people talk about comes from something different: paying half the monthly repayment every fortnight. There are 26 fortnights in a year, so $1,798.65 a fortnight adds up to thirteen monthly repayments instead of twelve. On this loan that clears it in about 24 and a half years and saves around $149,000. Our pay off your home faster calculator models it on your own figures.

Interest-only repayments pay the interest and nothing else, so for the length of the period the balance does not fall. They suit some investors, whose interest is tax-deductible and who would rather keep cash for other purposes, and they are usually offered for one to five years at a time.

The cost shows up when the period ends. Five years interest-only on $600,000 at 6% is $3,000 a month; after that the whole $600,000 has to be repaid over the remaining 25 years, and the repayment jumps to $3,865.81 — $865.81 a month more than before, and more than the $3,597.30 it would have been on principal and interest from the start. Over the life of the loan it costs $44,713 more in interest. Lenders often price interest-only loans higher too, which this calculator only reflects if you enter the higher rate.

At rates around 6%, every 0.25% rise adds roughly $16 a month for each $100,000 owing. On $600,000 that is $97 a month for a quarter-point rise and $394.51 for a full percentage point.

Lenders are required to allow for this before they lend. Under APRA’s rules they test whether you could still afford the loan if the rate were 3% higher than the one you will actually pay — at 9%, the repayment on $600,000 would be $4,827.74 a month. The table above shows the repayment at each step, and our borrowing power calculator shows how that test decides the size of the loan you can get.

Thirty years is the standard term for a new home loan because it gives the lowest required repayment. A shorter term costs more each month and much less overall: on $600,000 at 6%, 25 years means $3,865.81 a month, $268.51 more than over 30 years, and saves about $135,000 in interest.

The flexible version. Take the longer term, and pay the shorter term’s repayment voluntarily. You get most of the saving, and if money gets tight you can drop back to the lower minimum without asking the lender. It is the kind of structure our mortgage broking team sets up as a matter of course.