Mortgage Repayment Calculator Australia

How to calculate home loan repayments in Australia

Your mortgage repayment amount depends on three main factors: the loan amount (principal), the interest rate, and the loan term. Most Australian home loans are structured as principal and interest (P&I), meaning each repayment reduces both the interest owed and the outstanding loan balance.

The P&I repayment formula

Australian lenders work out a principal-and-interest repayment with the standard amortisation formula:

Repayment = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)

where P is the loan amount, r is the interest rate per repayment period (the annual rate divided by the number of repayments a year), and n is the total number of repayments (loan term in years × repayments per year).

Worked example

For a $500,000 loan over 30 years, paid monthly, at an illustrative rate of6.19% p.a. (an example chosen to show the arithmetic, not a rate on offer): the monthly rate is r = 6.19% ÷ 12 = 0.00515833, and the number of repayments is n = 30 × 12 = 360. Putting those into the formula gives a monthly repayment of about $3,059. Over the full term you would repay roughly $1,101,000, meaning about $601,000 in interest on top of the $500,000 borrowed. Lower the rate or shorten the term and both the repayment and the total interest fall. (These figures are an illustration only; enter your own numbers in the calculator above.)

The first repayment on that loan is $2,579.17 of interest and $479.93 of principal: 84% of it never touches the debt. That ratio is the reason a 30-year loan takes about 21 years to repay its first half, and it is why an extra repayment made early is worth so much more than the same money paid in year 25.

Fortnightly repayments are two different products

This calculator computes true fortnightly: it divides the annual rate by 26 and multiplies the term by 26. On the example loan that is $1,411.22 a fortnight and about $600,751 in interest, against $601,276 paid monthly. The saving is roughly $525 across thirty years, it comes from slightly more frequent compounding, and the loan still runs the full thirty years.

The schedule that genuinely pays a mortgage off faster is a different one: paying half the monthly repayment every fortnight. Twenty-six half repayments is thirteen monthly repayments a year, and the thirteenth goes straight to principal. On the same loan that is $1,529.55 a fortnight, the loan clears in about 24 years and 4 months, and the interest falls by roughly $132,000. Both schedules are priced side by side in the results above, because the two get talked about as though they were one thing. Ask your lender which one they are quoting before you assume a fortnightly switch shortens your loan.

Interest only, and what happens when it ends

An interest-only repayment covers the interest charged and nothing else, so the balance you owe on the last day of the interest-only period is the balance you started with. Australian lenders normally write interest only for one to five years on a thirty-year loan, then convert it to principal and interest over whatever is left of the term. Investors use it for the lower early repayment and the tax treatment of the interest.

Switch the calculator to Interest Only and it models exactly that, both phases. On $500,000 at the illustrative 6.19% with five interest-only years, the repayment starts at $2,579.17 a month, then rises to $3,279.83: a step up of 27%, because the same $500,000 now has 25 years to be repaid rather than 30. Total interest across the thirty years is about $638,700, against $601,300 on straight principal and interest. Set the interest-only period to the full term and the calculator says what that means out loud: nothing is ever repaid, and the whole principal falls due at the end.

What this calculator leaves out

The repayment is the loan, and only the loan. It excludes establishment, valuation, settlement and ongoing account-keeping or annual package fees, lenders mortgage insurance if you are borrowing above 80% of the property value, offset and redraw, and stamp duty. It also holds your rate flat for the whole term, which no variable loan does, and it charges interest once per repayment period where your lender accrues it daily and debits it monthly. That is why a lender's schedule will not match this page to the dollar. For the purchase costs, use the stamp duty calculator; for what a lender will actually advance you, the borrowing power calculator.