Home loan repayment calculator: your repayment, the total interest, and what changes both

How does a home loan repayment calculator work?

A home loan repayment calculator takes the loan amount, the interest rate and the term, and works out the repayment that pays the loan off by the end of the term. The one above also shows the total interest over the loan, and lets you pay weekly, fortnightly or monthly [2].

Four optional boxes show what moves the numbers: interest only for a set number of years, an offset balance, an extra repayment every period, and a rate change at a year you choose [2].

How is a home loan repayment worked out?

A home loan repayment is worked out so that the same amount, paid every period, covers that period's interest and pays off a little of the loan, until nothing is owed at the end of the term. It's the standard repayment formula, the arithmetic lenders use, so on the same three figures it matches what a lender would quote, give or take a few dollars for the lender's own rounding [2].

Interest is charged on what you still owe. The calculator takes the yearly rate, divides it by 12 for monthly repayments, and charges it on the balance. On $600,000 at 6.0%, that's $3,000 of interest in the first month [1]. Paying fortnightly or weekly splits the yearly rate 26 or 52 ways instead [2].

What are the repayments on a $500,000 home loan?

On a $500,000 home loan at 6.0% over 30 years, the monthly repayment is about $2,998 on principal and interest, meaning each repayment pays the interest and some of the loan [1]. The table shows six loan sizes at three rates, all over 30 years, paid monthly.

The rates are inputs chosen for the illustration, not lender rates. Put your own rate in the calculator above.

What this means for you: at 6.0% over 30 years, every $100,000 you borrow adds about $600 a month to the repayment [1]. It's a quick way to sense-check a price before you fall for a home.

How much does a 0.25% rate change move the repayment?

On a $600,000 loan over 30 years, each 0.25 percentage point moves the monthly repayment by about $95 to $98 [1]. Over the whole loan, each step moves the total interest by between about $34,000 and $35,300.

What this means for you: a quarter of a percent sounds small, but on a loan this size it's worth more than most features a loan can offer. The rate you're actually offered is the figure to get right first.

30 years or 25: how does the loan term change the repayment?

The loan term changes the repayment both ways: a longer term lowers it and raises the total interest. On $600,000 at 6.0%, a 25-year term costs about $269 a month more than 30 years, and about $135,300 less interest [1].

You don't have to choose a shorter term to get most of that saving. Paying the 25-year repayment on a 30-year loan, about $3,866 a month, clears it in 25 years with the same interest saved, and you can drop back to the lower repayment if you need to [1]. Put the difference, about $269, in the calculator's extra repayment box to see it.

How much of each repayment is interest?

In the early years, most of each repayment is interest. On $600,000 at 6.0% over 30 years, the first monthly repayment of about $3,597 is $3,000 of interest and about $597 off the loan [1].

The balance falls slowly at first and faster later, because each month there's a little less owed to charge interest on. On this loan, the part of each repayment that pays off the loan doesn't overtake the interest until year 19 [1].

What this means for you: after 10 years of repayments, you've paid about $333,800 in interest and still owe about $502,100. That's why money paid off early does the most work: it stops interest on that amount for the longest time.

Weekly, fortnightly or monthly: does it matter?

How often you pay matters far less than how much you pay. The calculator works out a true weekly or fortnightly repayment: the amount that clears the loan over the same term, paid 52 or 26 times a year [2].

On $600,000 at 6.0% over 30 years, that's about $830 a week, $1,659 a fortnight or $3,597 a month, and the total interest is almost the same each way: about $694,100, $694,400 and $695,000 [1]. Pick the one that matches your pay, so the repayment goes out when your wages land.

Does paying fortnightly save money?

Paying fortnightly saves money only if you pay more. The saving people talk about comes from paying half the monthly repayment every fortnight, about $1,799 on the example, instead of the true fortnightly $1,659. Over a year that's 26 half-payments, the same as 13 monthly repayments instead of 12 [1].

On the example, the loan is then paid off in about 24 years and 6 months, with about $148,000 less interest [1]. To see it in the calculator, choose fortnightly and put the difference, about $140 a fortnight, in the extra repayment box.

Paying a quarter of the monthly repayment every week works the same way: about $899 a week against a true weekly $830, and the loan is paid off in about the same 24 years and 6 months [1].

Why does interest only cost more over the loan?

Interest only costs more because the balance doesn't fall. An interest-only repayment covers the interest and nothing else, so when those years end you still owe what you started with, over fewer years.

On $600,000 at 6.0% over 30 years, principal and interest throughout is about $3,597 a month, with about $695,000 of interest. Five years of interest only is $3,000 a month, then about $3,866 for the remaining 25 years, with about $739,700 of interest: about $44,700 more [1]. The table shows shorter interest-only periods on the same loan.

Interest-only rates are often higher than principal-and-interest ones, which widens the gap. The full comparison is on interest only or principal and interest.

What happens to the repayment when interest only ends?

When interest only ends, the whole loan has to be paid off over the years that are left, so the repayment jumps above what principal and interest would have cost from the start. On the example, it goes from $3,000 to about $3,866 a month, a rise of about $866 overnight [1].

You can ask to extend the interest-only period, but it's a new application: the lender assesses you again, at its rules on the day, and may say no.

Lenders are also stricter about who gets interest only. CommBank's lending policy, for example, allows it up to 80% of the property's value on a home you live in, and up to 90% on an investment, with lenders mortgage insurance above 80% [3].

How much do extra repayments save?

Extra repayments save the interest that would have been charged on the money you've paid off, for every month left on the loan. On $600,000 at 6.0% over 30 years, $200 a month extra pays the loan off in about 26 years and 1 month, almost 4 years sooner, with about $106,700 less interest [1].

What this means for you: the first extra dollars work hardest. $100 a month saves about $58,400; ten times that saves about $320,600, not ten times as much, because the loan is gone sooner and there's less interest left to save.

Some fixed-rate loans limit extra repayments, so check yours before you plan on it. The calculator adds the same extra every period; it doesn't work out a one-off lump sum [2].

How much does an offset account save?

An offset account saves interest on its whole balance. It's an account linked to the loan, and its balance is taken off what you owe before interest is charged, so $30,000 in offset on a $600,000 loan means interest on $570,000 [2]. Your repayment stays the same, so more of it pays off the loan.

On $600,000 at 6.0% over 30 years, $30,000 held in offset for the whole loan pays it off about 3 years sooner, with about $131,600 less interest [1].

The calculator holds the offset balance the same for the whole loan [2]. Real balances rise and fall as pay comes in and bills go out, so read the result as the size of the saving, not a forecast. And an offset saves interest only on the balance you actually hold: if a loan charges a yearly package fee for features like an offset, check the saving is bigger than the fee.

Offset or extra repayments: which is better?

An offset and extra repayments cut interest the same way: money in offset and money paid off both stop interest being charged on that amount. The difference is access. Money in an offset stays yours to spend at any time; an extra repayment goes into the loan, and getting it back depends on the loan's redraw rules.

You can use both. On the example, $30,000 in offset and $200 a month extra together pay the loan off in about 23 years and 11 months, about 6 years sooner, with about $207,900 less interest [1].

If the home might become an investment later, which way you hold spare money can matter for tax. That's a question for your accountant before you choose.

What happens to my repayment if rates rise?

If the rate rises, the repayment is worked out again on what you still owe, over the years left. On the example, if the rate rises from 6.0% to 6.5% after two years, the repayment goes from about $3,597 to about $3,784 a month for the remaining 28 years [1].

The rates in the table are inputs for the illustration, not a forecast. The calculator works one rate change; to test another, run it again with the balance and years left at that point.

What this means for you: before you commit, run your loan at a rate 1 or 2 points higher than today and ask whether you'd still be comfortable. A lender runs a tougher test than that anyway, as the next part shows.

How do lenders test whether you can afford the repayment?

Lenders test your repayment at a higher rate than the one you'll pay. APRA, the banking regulator, expects them to check you could still make the repayments at a rate at least 3 percentage points higher [4]. On the example, a loan at 6.0% is tested at 9.0%, where the repayment would be about $4,828 a month, about $1,230 more [1].

That's why a repayment you can afford may still be more than a lender will approve, and why a repayment calculator doesn't tell you how much you can borrow. That's a different question: see how much can I borrow and the borrowing capacity calculator.

Does lenders mortgage insurance change the repayment?

Lenders mortgage insurance (LMI) can change the repayment, because it's usually added to the loan. LMI is insurance the lender takes out when you borrow more than 80% of the property's value, and you pay for it as a one-off premium.

An illustration from one insurer's published rate card [5]: a $600,000 home with a 10% deposit is a $540,000 loan, and the premium would be about $11,340. Added to the loan, it lifts the repayment at 6.0% over 30 years from about $3,238 to about $3,306 a month, about $68 more, and costs about $24,500 over the loan: the premium plus about $13,100 of interest on it [1].

Premiums vary between lenders and insurers, so this is indicative, not a quote. Some buyers avoid LMI altogether, through the 5% Deposit Scheme or a profession waiver.

How do you work out repayments on an investment property loan?

Repayments on an investment property loan are worked out the same way: the amount, the rate and the term. What often differs is interest only, which some investors use to keep repayments down for a set time, and interest-only rates are often higher than principal-and-interest ones, so use the rate you've been quoted for that loan.

On an investment, CommBank's policy allows interest only up to 90% of the value, with lenders mortgage insurance above 80% [3]. How the interest is treated for tax is a question for your accountant. If you're buying with equity from your home, see using equity to buy an investment.

How do I work out the repayment on my existing loan?

For a loan you already have, put in what you owe today, your current rate and the years left, not the original amount or a fresh 30 years. Your statement shows the balance and the rate, and your lender can tell you the years left if the statement doesn't.

The years left matter a great deal. Moving a $500,000 loan with 22 years left at 6.5% onto a new 30-year loan at 6.0% drops the repayment from about $3,565 to about $2,998. But you'd pay about $579,000 in interest over the 30 years, against about $441,000 if you'd stayed where you were [1]. If you're weighing a switch, the refinance calculator compares on the years you have left.

Fixed or variable: what does the calculator assume?

The calculator uses one rate for the whole loan, or one rate and then one change [2]. A fixed rate is set for a period; when it ends, the loan moves to another rate, which may be higher. To see that, put in the fixed rate, then the year it ends and the rate you expect after it as the rate change.

A split loan, part fixed and part variable, works as two loans here: run each part on its own and add the two repayments. Leaving a fixed rate early can bring a break cost, and some fixed-rate loans limit extra repayments, so check both before you plan around them.

What doesn't a repayment calculator tell you?

A repayment calculator is arithmetic on the figures you put in, not a lender's assessment and not an offer [2]. It doesn't know what rate you'd be offered, whether a lender would approve the loan, or what fees come with it.

It works the levers one at a time: an offset or extra repayment is worked on principal and interest, and a rate change is worked on its own, not combined with them [2]. It doesn't work out a one-off lump sum, and it doesn't tell you how much you can borrow.

• Borrowing capacity calculator
• Should I refinance?
• MoneySmart's mortgage calculator

What does a broker cost you?

How a broker is paid, and the rule Money Brain holds against it, is set out in full on its own page: what a mortgage broker costs.

Your first move

You've seen what moves a repayment; the one question left is what rate a lender would actually offer you, on your loan and your file.

That's the number that turns this calculator's estimate into a plan, and it's what Money Brain works out before anything goes to a lender.