How Mortgage Repayments Are Calculated

What does this mortgage repayment calculator estimate?

The calculator builds a payment-by-payment estimate from the loan amount, annual interest rate, term, repayment frequency and repayment type you enter. Each scenario has its own inputs. The results show the regular repayment, interest, ongoing fees, an estimated loan term, a balance graph and a full payment schedule.

How are regular mortgage repayments calculated?

For a principal-and-interest loan, the tool sets a regular payment intended to clear the modelled balance over the selected term at the active rate. Each payment first covers that period's interest. The remainder reduces the loan balance. If the annual rate is zero, the model spreads the balance evenly across the remaining payments.

The period rate is the annual rate divided by the number of repayments in a year: 12 for monthly, 26 for fortnightly, 52 for weekly, 4 for quarterly and 1 for annual. Interest for a period is the opening balance, less any modelled starting offset balance, multiplied by that period rate. The next period begins with the previous period's closing balance.

For an interest-only scenario, the regular payment covers modelled interest only. The balance will not fall through scheduled payments alone. Any extra repayment or lump sum can still reduce it. An interest-only result showing the selected term does not mean the principal will be paid off by then.

See a monthly repayment example or learn how to read each schedule column.

How do weekly, fortnightly and accelerated repayments differ?

Ordinary weekly and fortnightly options calculate a payment using 52 or 26 periods a year. Accelerated weekly and fortnightly options start from the calculated monthly payment, then use one-quarter or one-half of that amount at each weekly or fortnightly payment. Because there are 52 weeks and 26 fortnights in a year, accelerated payments can add up to more than 12 monthly payments.

The calculator does not use actual calendar payment dates. A lender's debit dates and daily interest method may produce a different result. Compare the frequency options step by step.

How are introductory and ongoing interest rates modelled?

Enter the temporary rate and its length in months, plus the rate that follows it. The temporary rate applies to repayment periods whose elapsed time falls within that length. The ongoing rate starts at the first period after it. When the rate changes, the model recalculates the principal-and-interest payment for the remaining term. It does not predict future rate moves or a lender's actual revert rate.

The model keeps a separate scheduled balance when setting the regular payment at a rate change. Offset savings, extra repayments and lump sums normally shorten the estimated payoff time instead of automatically lowering that scheduled payment. See how to compare a temporary rate with the ongoing rate.

How do extra repayments, lump sums and offsets change the result?

• Extra repayments: The amount is added every selected repayment period from the first period at or after the start month. It reduces principal after that period's interest and normal repayment are accounted for.
• Lump sum: Month 0 applies the payment before the first regular period. A later month applies it at the first repayment period at or after that month. The model never applies more than the balance still owing.
• Starting offset: The entered balance stays fixed for the whole model. It reduces the balance used to calculate interest, down to zero, but it does not pay down principal or change the scheduled payment by itself. Deposits, withdrawals and changing offset balances are not modelled.

For example, at the start of a $600,000 loan at 6.25% with monthly repayments, one modelled month of interest is $3,125 without an offset. A fixed $50,000 starting offset makes that month's modelled interest about $2,865. The difference is about $260 for that first period. The actual effect changes as the loan balance changes.

Test extra repayments, test a dated lump sum, or understand the offset input.

How are fees and scenario cost differences calculated?

Yearly and monthly ongoing fees are converted into an amount for each selected repayment period: yearly fee divided by periods per year, plus 12 monthly fees divided by periods per year. Fees add to cash paid and total cost. They do not reduce the loan balance. There is no separate upfront-fee input. If you add an upfront refinance cost to the loan amount, the model treats that cost as borrowed money that can also attract interest.

The comparison's cost measure is total modelled interest plus ongoing fees; it excludes repayment of the amount borrowed. Scenario 1 is the reference. A result marked less costs less than Scenario 1 on this measure, while more costs more. A lower regular repayment alone can still mean a higher long-term cost, especially if the loan term is longer. See the refinance comparison guide.

Why might this schedule differ from a lender's figures?

The engine retains more precision while calculating, but the site displays money rounded to whole Australian dollars. It converts the chosen term to whole repayment periods and labels the schedule in approximate elapsed months. The payment-period method, rounding, payment dates, rate-change dates, fee timing and lender-specific rules can all produce differences.

The model does not include every establishment, package, settlement, discharge or break cost; changing offset deposits; lender limits on extra payments; or tax effects. It is not a regulated comparison-rate calculation. Check the lender's current Key Facts Sheet, fee schedule and loan terms when comparing an actual offer.

The PDF report guide shows how to keep a copy of your assumptions and estimated results. For general-use limits, read the disclaimer.