Mortgage Repayment Calculator

The suitable home loan will vary from person to person; it’s not a one-size-fits-all situation. What type of loan suits you will depend on your personal circumstances and finances.

Some variables can have a huge impact on the ongoing repayments and cost of the loan. These may include whether your loan is for an investment property or a primary residence, or whether you choose a fixed interest rate or a variable rate. These all contribute to how much you’ll be paying back each week, fortnight or month.

What can the Mortgage Repayment Calculator tell me?

The Mortgage Repayment Calculator can give you an estimate of what your mortgage repayments could be and how much interest you’ll potentially pay over the course of the loan. Of course, this depends on what type of loan you take out, the interest rate, whether you make repayments fortnightly or monthly, and the length of the loan. The Mortgage Repayment Calculator lets you adjust some of those variables to see how they could affect your repayments.

How do I use the Mortgage Repayment Calculator?

It’s not difficult to use, you just need to put in some basic information and the calculator will give you a good estimate of what your repayment could be. You can then adjust a couple of these variables to see if that makes a difference to your repayments and loan term.

What information do I put into the Mortgage Repayment Calculator?

To get started you simply put this information into the Mortgage Repayment Calculator:

• The amount you’ll be borrowing: You can adjust this amount to see how much you might be able to afford to borrow, which will affect the properties you consider buying.
• The loan period: This is typically between 20 and 30 years. If you choose a shorter term, you’ll likely pay more each month, but will generally end up paying less interest overall. A loan over a longer repayment term could mean lower monthly payments, but a greater amount of total interest paid.
• Loan type: Interest rates vary between lenders and can fluctuate with changes in the official cash rate. You can choose a variable interest rate loan, which means that changes in the interest rate will affect your loan repayments. So, if the variable rate comes down, your interest payments will generally reduce, and vice versa.

With a fixed rate loan, you lock in the interest rate at the time you take the loan, typically for a period of 1-5 years. If the variable rate rises over the period of your fixed term, your interest rate will remain the same, thus potentially saving you money. If the variable rate comes down, however, you’ll be locked into a higher rate for the fixed period of your loan.

If you do decide to refinance your fixed rate home loan during the fixed period, you will likely be charged break costs by your lender. Consider whether the benefits of refinancing will be worth the break costs. If not, it may be a good idea to wait until your fixed period ends to switch home loans.

An introductory interest rate will offer you a low ‘honeymoon rate’ for a set period of your loan, after which it will revert to the full variable rate. You need to be aware of what your new payments will likely be, and make sure you can afford them.

• The interest rate: The interest rate lenders offer you will vary, so take a close look at the figures. And when considering rates, remember that what might seem like small differences in rates can make a substantial difference to the amount you pay over the life of your loan. The Mortgage Repayment Calculator will give an estimate of what your payments could actually be.

Be aware of fees that can sneakily reduce the competitiveness of a low interest rate. Sometimes it may make more sense to opt for a home loan with no fees and marginally higher interest rate than a low-rate home loan with high fees. Try not to get distracted by incentives and introductory offers when there is a whole loan to consider.

• Repayment type: Outside of the actual interest rate, one thing that can change the amount you pay is the type of mortgage you take out. There are two main types of loan repayment:

1. Principal and interest:. This is the most common type of home loan. It means that each month, some of what you pay goes to reduce the amount of the loan outstanding, the rest goes to pay the interest that accumulates on the loan. So as time passes, the amount you owe reduces, the amount of interest you pay comes down, and you will eventually pay off the loan in full.
2. Interest only: As the name suggests, with an interest only loan your repayments only cover the interest. They don’t reduce the amount of money you owe. Generally, these loans have a limited interest only period of up to 5 years. At the end of that period your repayments will increase to include paying off the principal and the interest.

While an interest only loan can make your repayments lower right now, your payments will eventually rise. Plus, you’ll likely end up having the loan for a longer total period than if you were paying both principal and interest from the start.

• How often you make repayments: You can generally choose to make repayments on your loan monthly, fortnightly or weekly. If you take out a principal and interest loan, by paying your loan more frequently you bring down the principal and, therefore, the interest paid. And because a calendar month is more than four weeks, you end up paying more off your loan quicker. It’s worth remembering that frequent repayments only make a difference if you are paying off the principal as well as the interest of your loan.

How do I read the Mortgage Repayment Calculator results?

One line of the graph indicates the principal (amount you owe) remaining each year, while the other line includes interest charges and shows the total amount left to pay on the loan. The Mortgage Repayment Calculator also shows you a yearly breakdown of the information. A table shows the interest charged each year, the principal remaining, and the total amount owing. Getting a feel for your new ongoing repayments can give you a clearer picture of your budget and help you plan your future finances accordingly.

Can I make adjustments?

If you’re new to the home loan game, it can be worth changing some of the variables to see how much difference small things can make to the length of your loan – particularly your repayment schedule and the initial interest rate. It’s a real eye-opener and potential money-saver.

Are there other fees and charges to know about?

Remember that the Mortgage Repayment Calculator results don’t include all the extra fees and charges you’ll incur while taking out a loan. It’s an estimate only and you should be aware that interest rates can change and that could influence your repayments.

So, don’t rely solely on the Mortgage Repayment Calculator results. If you’re unsure of anything, it’s always a good idea to seek professional advice before taking out your home loan.

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At iSelect we’ve partnered with Lendi to help you compare home loans from over 25 lenders and over 2,500 home loan products.* Compare online or give Lendi a call on 1300 186 260 (08:30-18:30).

Sources:
1. https://moneysmart.gov.au/home-loans/choosing-a-home-loan
2. https://moneysmart.gov.au/home-loans/interest-only-home-loans

Last updated: 26/04/2021