Mortgage Calculator

Mortgage repayments in Australia are calculated using the standard amortization formula. This formula takes into account your loan amount (property price minus deposit), the interest rate, and the loan term to determine your regular monthly payment.

The formula is: M = P × [i(1 + i)^n] / [(1 + i)^n - 1]

• M = Monthly repayment amount
• P = Principal (loan amount)
• i = Monthly interest rate (annual rate ÷ 12 ÷ 100)
• n = Total number of payments (years × 12)

For example, a $600,000 loan at 6.5% over 30 years results in monthly repayments of approximately $3,792. Over the life of the loan, you would pay around $765,000 in interest alone – more than the original loan amount!

Making extra repayments on your home loan is one of the most effective ways to reduce your total interest paid and pay off your mortgage faster. Even small additional amounts can make a significant difference over the life of your loan.

How Extra Repayments Work

When you make extra repayments, 100% of that additional payment goes directly to reducing your principal balance. This means:

• Less interest charged: Interest is calculated on your outstanding balance, so a lower balance means less interest each month
• Faster payoff: More of each subsequent payment goes toward principal, creating a snowball effect
• Compound savings: The interest you save also compounds over time, multiplying your benefits

Real Example

Using our calculator with a $600,000 loan at 6.5% over 30 years, adding just $500 per month in extra repayments would:

• Pay off your mortgage approximately 8 years earlier
• Save approximately $280,000 in interest
• Reduce your total loan cost by more than a third

Use the calculator above to see exactly how much you could save with your specific loan details.

Amortization is the process of spreading your loan repayments over time, with each payment covering both interest and principal portions. Understanding how amortization works helps you make smarter decisions about your home loan.

How Amortization Works

In the early years of your mortgage, most of your monthly payment goes toward interest, with only a small portion reducing your principal. As you progress through the loan term, this ratio gradually shifts:

• Years 1-10: The majority of payments are interest, principal reduction is slow
• Years 11-20: Payments start to split more evenly between interest and principal
• Years 21-30: Most of each payment now goes toward principal, balance drops faster

Reading the Amortization Chart

The chart above shows your remaining loan balance over time. The steeper the curve at the end, the faster you are paying down the principal. Notice how the line is flatter in early years and steeper toward the end – this illustrates how more of your payment goes to principal as time progresses.

When you add extra repayments, you will see a second line showing how your balance would decrease faster, reaching zero earlier than the standard repayment schedule.

Australian Home Loan Considerations

When taking out a home loan in Australia, there are several important factors to consider:

Lenders Mortgage Insurance (LMI)

If your deposit is less than 20% of the property value, you will likely need to pay Lenders Mortgage Insurance. LMI can add thousands to your upfront costs, so consider whether saving for a larger deposit might be worthwhile.

Fixed vs Variable Rates

This calculator uses a fixed interest rate for calculations. In reality, Australian home loans often have variable rates that fluctuate with the RBA cash rate. Consider using this calculator with different rate scenarios to understand your repayment range.

Offset Accounts and Redraw

Many Australian home loans offer offset accounts or redraw facilities, which can effectively reduce your interest charges similar to making extra repayments, while maintaining access to your funds.