Mortgage Calculator

What is the Mortgage Calculator?

The iSelect Mortgage Calculator (or home loan calculator) is a super useful tool for anyone trying to get their head around how much a home loan will cost. Home loans can be a bit confusing, but essentially this calculator breaks down the important bits of info to give you an indication of what your ongoing repayments might be, as well as the total interest you’ll pay. If you understand how your repayments work, you’ll be able to decide on a budget and plan for the future.

How do I use the Mortgage Repayment Calculator?

The Mortgage Calculator is simple to use. You just need to enter the following bits of information and it does the rest for you. We’ve broken it down into steps, but you can really fill in the pieces of info in whatever order.

Step 1: Size of the loan

First up, enter the amount you want to borrow. You can adjust the amount from $10K to $2M.

Step 2: Loan type

Then select a loan type from a drop-down menu, with the following options:

• A basic variable home loan: This is a home loan with a variable interest rate, meaning the rate can change during the duration of your term. Many lenders will adjust their interest rate in line with changes to the Australia's Official Cash Rate (OCR). So, if the OCR goes down, your interest rate might also drop, which would mean the cost of your repayments could go down as well. But it also works in the reverse. So, if the OCR rate goes up, your interest rate might also increase. You can also make unlimited extra repayments on a variable rate home loan.
• A variable with offset: When you choose a variable rate home loan, you also have the option of attaching an offset account. When you set this up, the balance of your offset account will be taken off the principal before the interest is calculated. So, you’ll pay less interest. You can also look into other loan features, such as redraw facilities.
• A fixed home loan: When you lock-in a fixed rate home loan, you fix that rate. So, the interest rate won’t fluctuate for the duration of your term. If the OCR goes up, you could potentially save a bit of money. But if the OCR goes down, you might miss out. You can pick between a 1 year and 5 year fixed rate on our Mortgage Calculator.

Step 3: Loan Term

Next, you need to decide on how many years you’ll want to take to repay your loan. A shorter loan term generally means you’ll pay less in interest, but higher repayments. A longer loan term means the opposite; more interest and lower repayments. Most people aim to get the shortest loan term they can afford. 

Step 4: Interest Rate

The interest rate will default based on the loan type you selected. But you can also increase or decrease the amount to see how a drop or rise in interest can affect your repayments. You’ll notice that even the smallest change in rates can have a big impact on the amount you pay over the life of your loan.

Step 5: Repayment Frequency

Next up, you need to select the repayment frequency. Generally, you have the choice of paying weekly, fortnightly or monthly.

Step 6: Repayment

And last but not least, the repayment type. When deciding on a home loan you have two types to choose from:

• Principal & Interest: If you decide on this type of home loan, your monthly repayments will go towards paying off the amount borrowed as well as the interest on that amount. So, the interest and the amount borrowed will gradually reduce over the term of the loan.
• Interest Only: For this type of home loan, your repayments only cover the interest on the amount you borrowed. So, to begin with, your repayments will be lower. But at the end of the interest-only period, your loan will automatically change over to a principal and interest loan. So, then you’ll have to start paying off the amount borrowed, as well as interest on that amount. Interest only loans are more common for property investors trying to maximise their tax savings.

How do I read the Mortgage Calculator results?

Once you’ve filled in all the required info, the Mortgage Calculator will tell you what your ongoing repayments might be, as well as the total interest payable on your home loan. Remember these results are just an estimate, but they should give you a pretty good idea of what to expect.

If you click on the graph icon, you’ll see a breakdown of your repayments over the course of the term. One line on the graph indicates the principal remaining each year, and the other line includes interest charges to represent the total amount left to pay on the loan.

If you click on the list icon, you’ll see a yearly breakdown of this information, with a table showing the interest charged per annum, the principal remaining, and the total amount owing.

On the hunt for a competitive home loan?

Well, you’re in the right place. At iSelect we’ve partnered with Lendi* to help you compare over 2,500 home loan products from over 35 lenders. Click here to start comparing home loans, or give Lendi a call on 1300 186 260 between 8:30 am-6:30 pm!

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: 30/04/2021