Repayment Calculator

Home loan repayments are calculated using the loan amount (principal), interest rate, and loan term (typically 30 years). The formula accounts for compound interest, meaning early repayments are mostly interest with minimal principal reduction. For example, a $500,000 loan at 6.5% over 30 years results in $3,160/month repayments ($37,920/year). In year 1, approximately $2,708/month goes to interest and only $452 to principal. Use our repayment calculator above to model different scenarios.

Principal & Interest (P&I): You repay both the borrowed amount (principal) and interest charges. This reduces your loan balance over time. Example: $500K at 6.5% = $3,160/month, fully repaid in 30 years. Interest-Only (IO): You only pay interest charges, not principal. Loan balance stays $500K. Monthly cost is lower ($2,708/month) but you don't build equity. IO periods typically last 1-5 years, then revert to P&I with higher repayments. Investors often use IO to maximize tax deductions and cashflow.

A 1% rate change significantly impacts repayments. On a $500,000 loan over 30 years: At 6.0%, repayments are $2,998/month. At 6.5%, repayments are $3,160/month (+$162/month or $1,944/year). At 7.0%, repayments are $3,327/month (+$167/month or $2,004/year). A 1% increase from 6.5% to 7.5% adds $329/month ($3,948/year). For a $750,000 loan, a 1% rise adds $500/month. When interest rates peaked at 8.5% in 2023, borrowers faced $500-$800/month increases compared to 2021's sub-3% rates.

Five strategies to lower repayments: 1) Refinance to a lower rate (switching from 6.5% to 6.0% saves $162/month on $500K loan), 2) Extend loan term (increasing 25 years to 30 years reduces monthly cost but increases total interest), 3) Switch to interest-only temporarily (reduces payments by 15-20% but doesn't reduce principal), 4) Negotiate with current lender (loyalty discounts of 0.2-0.4% available), 5) Increase offset account balance (every $100K in offset reduces interest like making extra repayments). Combination of refinancing + offset can save $300-$500/month.

30-year term: Lower monthly repayments ($3,160 vs $3,464 on $500K at 6.5%), better cashflow, but pay $173,373 total interest over life of loan. 25-year term: Higher monthly repayments (+$304/month), but save $52,000 in total interest and own home 5 years earlier. Pay off $500K loan in 25 years = $869,287 total repaid. Pay off same loan in 30 years = $1,137,720 total repaid. Choose 30 years if cashflow is tight or you plan to make extra repayments (giving flexibility). Choose 25 years if you can afford higher payments and want forced discipline.

Early in the loan, most repayments are interest. On a $500,000 loan at 6.5%: Year 1: $32,496 interest, $5,424 principal (86% interest). Year 10: $26,208 interest, $11,712 principal (69% interest). Year 20: $14,640 interest, $23,280 principal (39% interest). Year 30 (final year): $1,848 interest, $36,072 principal (5% interest). The interest/principal split improves as principal reduces. Making extra repayments early dramatically accelerates this shift - $200/month extra from year 1 can save $120,000 interest and 8 years off the loan.

Total cost depends on interest rate and term. At 6.5% over 30 years: Borrow $500,000, repay $1,137,720 total ($637,720 in interest). At 6.0% over 30 years: Borrow $500,000, repay $1,079,191 total ($579,191 in interest). At 6.5% over 25 years: Borrow $500,000, repay $1,039,373 total ($539,373 in interest). Even 0.5% rate reduction saves $58,529 over 30 years. Reducing term from 30 to 25 years saves $98,347. Making $500/month extra repayments from day 1 saves $200,000+ interest and cuts loan term to 17 years.

Fortnightly repayments result in 26 payments/year (13 months) vs 12 monthly payments. On a $500,000 loan at 6.5%: Monthly repayments: $3,160/month = $37,920/year, paid off in 30 years, total interest $637,720. Fortnightly repayments: $1,580/fortnight = $41,080/year (extra $3,160 annually), paid off in 25 years 8 months, total interest $549,840. Savings: $87,880 interest saved + own home 4.3 years earlier. This works because you make one extra month's payment per year without feeling it. Even switching from monthly to fortnightly at year 10 still saves $40,000+ interest.