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How to calculate mortgage repayments

Housing costs typically take the biggest bite out of a person’s budget each week, fortnight, or month. That’s why it's important to calculate the repayments on a home loan before signing on the dotted line. Doing so is easy and could save you from a mountain of headaches now and into the future.

Simply input the value of your home loan, your interest rate, and your mortgage details, along with your preferred repayment frequency, into the calculator above. Once you’ve done that, Savings.com.au will calculate what your regular repayments will most likely be. 

And that’s not all. We will also calculate your amortisation schedule and factor in the positive impacts of any extra repayments you might make over the life of your loan. It’s that easy.

How much can I afford to borrow?

Whether you’re in the market for your first house, a residential upgrade, a downsizer, or you’re on the hunt for a new investment property, it’s integral to consider how much you can afford to borrow. Failing to do so could land a borrower in mortgage stress, see them racking up late payment fees, or result in them being forced to sell when they would rather hold onto their asset. 

The more a person borrows, the larger their repayments will be. That’s partially because a person with a larger loan will have more to repay their lender. For the most part, however, a larger loan will demand larger repayments because of interest. 

A person with a home loan will pay interest on every dollar they owe their lender. Thus, the more they owe, the larger the interest component of their regular repayments. 

Because borrowers pay interest on every dollar borrowed, they typically pay more interest in the early years of their mortgage, before they’ve had the chance to pay down a hefty chunk of their principal balance. But don’t be fooled. Your regular repayments won’t get any smaller as the years go by (unless you refinance to a better deal or your interest rate goes down). Rather, the portion of your repayments that goes towards interest gets smaller while the share going towards paying down your principal grows.

How much you can afford to borrow will also depend on your lender’s serviceability tests. Lenders use serviceability tests to assess whether you can meet your regular repayments with your current income and expenses.

Australian banks must ensure you could still meet your home loan repayments if interest rates were to increase by another 3%. While non-bank lenders don’t necessarily have to do the same, most will still consider a person’s income and financial situation prior to offering them a home loan. 

If you’re unsure how much a bank or lender will let you borrow, check out Savings.com.au’s Home Loan Borrowing Calculator & Guide.

How does my interest rate impact my repayments?

Perhaps the most influential factor on a person’s home loan repayments is their interest rate. It determines how much interest is charged on each dollar borrowed. And it can have a big impact on the size of a person’s mortgage repayments.

Take a look at how a single percentage point can make a notable difference to the repayments on a 30-year, $400,000 home loan:

Interest rate

Estimated monthly repayments 

2% p.a.

$1,478

3% p.a.

$1,686

4% p.a.

$1,910

5% p.a.

$2,147

6% p.a.

$2,398

7% p.a.

$2,661

8% p.a.

$2,935

It's important to remember that the interest rate a borrower signs up with might not be the interest rate they realise for the decades to come. Interest rates tend to fluctuate as the years go by, mainly on the back of the cash rate.

The cash rate is determined by the Reserve Bank of Australia (RBA) and dictates many things, including how much banks have to pay to borrow money themselves. Thus, if the cash rate is high, banks and lenders typically pass on their extra costs to borrowers by upping loan interest rates. 

There are two types of interest rates that home loan borrowers need to know about:

1. Fixed interest rates

Fixed interest rates are locked in for a set period of time – typically between one and five years. A borrower can have certainty that their home loan repayments will remain the same for the duration of their fixed rate period.

2. Variable interest rates

Variable interest rates can change quickly and easily. A bank or lender need only provide 21 days’ notice before changing a borrower’s variable interest rate. 

What is the amortisation schedule for my loan?

A home loan amortisation schedule is an easy way to visualise how much of your repayments go towards interest and how much is actually paying down the balance of your mortgage and how that will change over the years.

In the early days of a mortgage, a larger slice of each repayment will typically go towards interest. As the years go on and the principal balance is paid down, the portion that covers interest shrinks while the portion paying off the principal balance grows. 

That’s because how much interest you pay depends on how much you owe. Thus, the more of your debt you repay, the less interest you’re charged. 

Let’s use our $400,000, 30-year home loan as an example once more, this time assuming a constant 6% interest rate:

  • In its initial year, only $4,912 of a person’s regular repayments will go towards reducing the loan's principal balance, with a larger portion of $23,866 allocated to interest payments.

  • By its 15th year, the principal portion of the repayments will increase to $11,354, while the interest portion will decrease to $17,424.

  • In its 30th year, a substantial $27,864 of our fictional borrower's repayments will be dedicated to reducing the balance, leaving just $914 for interest repayments.

How do extra repayments impact my home loan?

So, that leads us to extra repayments. If you’ve got some spare cash, or find you can afford to pay more towards your regular repayments, it might be worth considering making additional mortgage repayments.

Extra repayments can expedite the time it takes to pay off a home loan. That’s because they directly reduce the principal balance of a mortgage – reducing how much a person must pay back and how much debt they’re charged interest on. 

Extra repayments can be as small as $10 a month or as large as the full value of a loan. Though, some banks or lenders might penalise a person making too many extra repayments, particularly if they have a fixed-rate home loan.

The earlier a borrower starts making extra repayments, or pays off a chunk of their mortgage with a lump sum repayment, the larger the impact.

Principal & interest repayments versus interest only repayments

You might have noticed that the Savings.com.au Home Loan Repayment Calculator asks whether a borrower is making ‘principal and interest repayments’ or ‘interest-only repayments’. But what do the two options mean, and is one better than the other?

Well, if you’re hoping to pay down your mortgage, you’ll probably want to make principal and interest repayments. Doing so will mean a portion of each repayment goes to paying down the balance of your home loan.

On the other hand, a person making interest only repayments will hold the same amount of debt at the end of each week, month, or year. The entirety of their repayments will go towards paying the interest accrued on their home loan. 

Generally speaking, owner-occupiers typically make principal and interest repayments while investors might be more inclined to make interest only repayments. That’s largely because some investors bet on their property’s value rising over time and aim to earn a profit when they sell. Therefore, they might value paying down their balance less. On top of that, if they lease their property out they might be able to claim interest expenses as a tax deduction.

Does the frequency of my repayments matter?

Interestingly, how often you make home loan repayments can impact how long it takes you to pay off your mortgage.

Many lenders use monthly repayments as their base case. And when it comes time for them to calculate fortnightly or weekly repayments, they may simply take the monthly repayment and slash it in half or into quarters. But we all know that not all months contain exactly four weeks. 

Thus, if a lender uses this method and a borrower chooses to make fortnightly or weekly repayments, they actually make 13 months’ worth of repayments each year. Let’s pull our 30-year, $400,000 mortgage with a 6% interest rate out for one last example:

Imagine our borrowers paid monthly repayments. Using the above home loan calculator, we can see they would make a monthly repayment of $2,398, or $28,776 worth of repayments a year. 

If they were to make fortnightly repayments, however, they would pay $1,199 every two weeks, or $31,174 worth a year. 

By paying an extra $2,400-odd dollars every year, they could pay off their mortgage five years early and save more than $99,000 in interest over the life of their home loan. 

Readers will know there are 52 weeks, 26 fortnights, and 12 months in a year. But 12 doesn’t divide neatly into 52, and so that extra is considered just that: Extra repayments.


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loans.com.au – Variable Home Loan (LVR < 90%)

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          NAB – Base Variable Home Loan (Principal and Interest) (New Customer)

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            ANZ – Fixed Rate Home Loan (Principal and Interest) 5 Years (LVR < 80%)

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              loans.com.au – Solar Home Loan (Principal & Interest) (LVR < 90%)

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                Heritage Bank – Discount Variable Home Loan ($150k+) (LVR < 70%)

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                        IMB Bank – Fixed Rate Home Loan (Principal and Interest) 3 Years (LVR ≤ 80%)

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                          ING – Fixed Rate Home Loan 5 Years (LVR < 80%)

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                            Newcastle Permanent – Fixed Rate Home Loan (Principal and Interest) 5 Years

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                              Newcastle Permanent – Premium Plus Package Fixed Rate Home Loan (Principal and Interest) 1 Year

                                Important Information and Comparison Rate Warning

                                Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of May 28, 2024. View disclaimer.