Mortgage Repayment Calculator

What is Mortgage Repayment?

A mortgage repayment calculator shows how much you'll pay each month on a home loan, including both principal (the amount you borrowed) and interest (the cost of borrowing).

How this calculator works

This calculator uses the standard amortisation formula used by Australian banks. For principal and interest loans, each monthly payment is the same amount, but the split between principal and interest changes over time — early payments are mostly interest, while later payments are mostly principal. The amortisation chart visualises this progression. For interest-only loans, you only pay the interest each month and the loan balance doesn't decrease. The calculator also compares both options so you can see the total cost difference.

How Mortgage Amortisation Actually Works

Each monthly payment is calculated to fully repay the loan by the end of the term. The same dollar amount each month, but the split between principal and interest changes. Year 1 of a $500k loan at 6.1% over 30 yrs: of every $3,031 monthly payment, ~$2,542 goes to interest, only ~$489 to principal. By year 25 it's reversed. This is why extra repayments early in the loan have outsized impact.

Variable vs Fixed Rate

VARIABLE: rate moves with the RBA cash rate and lender's funding costs. Offset accounts, extra repayments, redraw — all standard. FIXED (typically 1-5 yrs): rate locked, predictable payments. Trade-offs: limited or no offset, extra repayment caps (often $10-20k/yr), and break costs that can be tens of thousands if you sell/refinance during the fixed term. Most Australian borrowers use variable; fixed becomes popular when rates expected to rise.

The Power of Extra Repayments

Even modest extra repayments transform total cost. $500k loan at 6.1% over 30 yrs: standard total interest $591k. Add $200/mo extra: total interest $479k (save $112k), pay off 4.5 yrs early. Add $500/mo: save $191k, pay off 8.4 yrs early. Every dollar of extra repayment earns a guaranteed 6.1% return (your mortgage rate) — better than most after-tax investments. Use offset for liquidity, extras for permanent reduction.

Lenders Mortgage Insurance (LMI)

Required if your deposit is under 20% of property value. LMI protects the LENDER (not you) against default. Typical LMI on $500k loan with 10% deposit: ~$8k-$15k, can be capitalised into the loan. Avoid LMI by: (a) saving 20% deposit, (b) family guarantee (parents pledge equity), (c) using the federal First Home Guarantee scheme (5% deposit, no LMI for eligible first home buyers), (d) some professional loans for doctors/lawyers.

How Banks Assess Your Application

Banks apply a 'serviceability buffer' — they assess whether you can afford repayments at your actual rate PLUS 3% (APRA requirement since Nov 2021). So a 6.1% loan is stress-tested at 9.1%. They also use the Household Expenditure Measure (HEM) as a minimum living-expense benchmark and verify expenses against bank statements. Debt-to-Income (DTI) ratio over 6× is flagged as high-risk by APRA.

Saving on Your Mortgage

(1) Negotiate every 6-12 months — banks routinely offer 'discretionary' discounts of 0.20-0.50% to existing customers who ask. (2) Refinance if your current rate is 0.5%+ above market — typical refinance saves $5k-$15k over remaining term. (3) Use offset account for emergency fund. (4) Pay weekly/fortnightly instead of monthly — saves ~$60k of interest on a $500k loan via the 'extra payment per year' effect. (5) Avoid honeymoon rates that revert to high standard variable rates.

All calculations are performed in your browser — your data never leaves your device. Results are for general guidance only and should not be considered professional financial advice.

Built and maintained by Konstantin Iakovlev. Data sourced from the ATO and official Australian government sources.