GUIDES & RESOURCES

Home Loans Principal and Interest Calculator

Using iSelect’s Principal and Interest Calculator can show you the difference that relatively small additional monthly payments can make over the life of your mortgage. It may inspire you to get on top of your loan and even try to pay it off early.

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A home loan is made up of two parts: the principal (the amount you borrowed) and the interest charged on the principal. The interest is calculated on a daily basis, so the less you owe, the less interest you may have to pay. Knowing how much monthly home loan interest you pay and what portion of your payment goes towards reducing the actual loan can be motivating.

How does the Principal and Interest calculator work?

It’s easy to use the Principal and Interest calculator, just follow the simple steps below:

  1. Enter the total amount of your home loan (this is the amount you agreed to borrow).
  2. Enter the term of your home loan (this is the total number of years over which you agreed to pay back your home loan).
  3. Enter the interest rate you’ll be charged on your home loan (check this on your loan statement).
  4. Select the frequency of your home loan repayments (weekly, fortnightly or monthly).
  5. Select whether you’ll be paying principal and interest or interest only.
  6. Select the Extra repayments tab and enter any extra repayments you’re making and the frequency of those extra repayments.

How to read the Principal and Interest calculator results.

The Principal and Interest calculator will provide you with a breakdown. It shows how much of your repayment will go towards the interest and how much towards the principal each month. It also displays a running total on how much you’ve paid towards each, as well as the principal you’ll have remaining at the end of every month. It’s a good idea to see what happens when you put in different extra repayment amounts into the Principal and Interest calculator.

It can show how it might reduce your interest charges and help you pay off your home loan sooner. Maybe you can see what would happen if you diverted funds from, say, your streaming services that you don’t use too often. Putting those funds into your home loan might have surprising long-term results. Seeing the difference it could make, by using the Principal and Interest calculator, is an eye opener and could inspire you to own that home sooner.

Can I make extra repayments on my home loan?

Not every borrower will be able to make extra home loan repayments. While having a variable rate home loan allows you to make unlimited additional repayments, fixed rate mortgages can come with restrictions. Most fixed rate home loans will not allow uncapped extra repayments and may charge break fees for going against your loan terms in this way.

Before you try to make extra repayments, contact your lender or read your home loan terms to ensure that you won’t be penalised. If you think that you might like to make extra mortgage repayments on your home loan, consider opting for or refinancing to a home loan with a variable interest rate. If you’d prefer a fixed rate, speak to a mortgage broker about finding a home loan that allows for some extra repayments to be made.

Compare home loans with iSelect and Lendi

At iSelect, we’ve partnered with Lendi, to help our customers compare home loans from a range of lenders and products and help them try to find a better deal. It’s not hard, it doesn’t take much effort and it may save you a lot. Click here to compare home loans with Lendi today, or give Lendi a call on 1300 186 260 (08:30-18:30).

Last updated: 09/09/2021

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