How mortgage repayments work
With a principal and interest loan, every repayment covers that period's interest plus a slice of the loan itself. In the early years most of each repayment is interest, which is why extra repayments made early have such a big effect. The chart in the calculator shows your balance falling slowly at first, then faster.
Monthly repayments at a glance
Principal and interest over 30 years, monthly repayments.
| Loan | 5.5% | 6.0% | 6.5% | 7.0% |
|---|---|---|---|---|
| $300,000 | $1,703 | $1,799 | $1,896 | $1,996 |
| $400,000 | $2,271 | $2,398 | $2,528 | $2,661 |
| $500,000 | $2,839 | $2,998 | $3,160 | $3,327 |
| $600,000 | $3,407 | $3,597 | $3,792 | $3,992 |
| $750,000 | $4,258 | $4,497 | $4,741 | $4,990 |
| $1,000,000 | $5,678 | $5,996 | $6,321 | $6,653 |
Ways to pay less interest
- Make extra repayments: even small amounts add up, because they cut the balance interest is charged on.
- Pay half your monthly amount every fortnight: you end up making the equivalent of one extra monthly repayment a year.
- Use an offset account: savings in an offset account reduce the balance you're charged interest on.
- Review your rate: ask your lender for a better rate, or compare refinancing options, keeping fees in mind.
Don't forget the upfront costs
Before you borrow, budget for stamp duty, which can be tens of thousands of dollars. Work it out for your state:
Common questions
How is a mortgage repayment calculated?
For a principal and interest loan, the repayment is fixed so that the loan is paid off exactly at the end of the term. Early repayments are mostly interest; later ones are mostly principal. The calculator uses the standard amortisation formula for your chosen repayment frequency.
Is it cheaper to pay fortnightly than monthly?
Paying the true fortnightly equivalent saves only a little. The bigger saving comes from paying half your monthly repayment every fortnight, because that adds up to 13 monthly repayments a year instead of 12. To see the effect, enter the difference as an extra repayment.
How much do extra repayments save?
Often a lot. On a $600,000 loan at 6% over 30 years, an extra $200 a month saves about $106,700 in interest and pays the loan off almost 4 years sooner. Check your loan allows extra repayments without fees, especially on fixed rates.
What's the difference between principal and interest, and interest-only?
Principal and interest repayments reduce your loan balance over time. Interest-only repayments are lower but the balance doesn't fall, so you pay more interest overall. Interest-only periods are usually limited to around 5 years.
What interest rate should I use?
Use the comparison rate or advertised rate you've been offered, or your current loan rate. Rates change, so check with your lender. Lenders also test that you could afford repayments at a higher rate, often about 3% above your actual rate.
Does this include stamp duty, LMI or fees?
No. It covers loan repayments only. Use our stamp duty calculators for your state to work out the upfront tax, and ask your lender about lenders mortgage insurance (LMI) if your deposit is under 20%.
This calculator gives estimates for general information and assumes a constant interest rate for the whole loan. It doesn't include fees, LMI or rate changes, and it isn't credit advice. Speak to your lender or a licensed mortgage broker before deciding.