Mortgage Repayment Calculator

How your mortgage repayment is actually calculated

Every standard home loan uses amortization, a method that spreads your repayments evenly across the loan term while quietly changing the mix of interest and principal with every single payment. The formula behind it looks intimidating but isn't complicated once you break it down:

M = P × [r(1+r)^n] / [(1+r)^n − 1]

Where M is your regular repayment, P is the amount you borrowed, r is your interest rate divided by 12 (for monthly repayments), and n is the total number of repayments over the loan term. Plug in a $600,000 loan at 6.17% p.a. over 30 years and you get a repayment of roughly $3,663 a month.

What the formula doesn't make obvious is how the interest-to-principal split shifts over time. In month one of that $600,000 loan, about $3,085 of your $3,663 repayment goes straight to interest, and only $578 chips away at what you actually owe. By year five you've only pushed the balance down to around $559,000, despite having paid over $200,000 in total repayments. This is why the first decade of a mortgage can feel like you're barely making a dent, because for a long time, you mostly are servicing interest, not the debt itself.

The practical takeaway: anything that reduces the principal faster, extra repayments, an offset account, a higher repayment frequency, has an outsized effect early in the loan when interest charges are at their highest.

Monthly vs fortnightly vs weekly: which repayment frequency wins?

Here's the thing most people miss: fortnightly repayments aren't just convenient, they're mathematically better than monthly. There are 26 fortnights in a year. Pay half your monthly repayment every fortnight and you end up making 26 half-payments, which works out to 13 full monthly payments a year instead of 12. That one extra month's worth of repayments a year is what drives the saving. Weekly works on the same idea, roughly a quarter of the monthly amount, 52 times a year, with a very similar result.

Based on a $600,000 loan at 6.17% p.a. over 30 years, assuming fortnightly and weekly repayments are set to exactly half or a quarter of the monthly amount and paid on that schedule for the full term. Figures are estimates and assume a constant rate.

The bottom line: fortnightly beats monthly, and weekly edges out fortnightly by a hair. If your income lands fortnightly, as it does for most Australian employees, matching your home loan to your pay cycle is both practical and a genuinely smart financial move. Use the Repayment Frequency toggle in the calculator above to switch between weekly, fortnightly and monthly, it applies the accelerated convention (half your monthly repayment each fortnight, a quarter each week) and shows exactly how many years and how much interest the faster cycle saves you.

Principal and interest vs interest-only repayments

This is one of the most consequential decisions you'll make when setting up a home loan. With principal and interest (P&I), every repayment covers both the interest for the period and a slice of what you borrowed, so your debt shrinks with every payment. On our $600,000 example, that's $3,663 a month. With interest-only, you pay just the interest on the outstanding balance, nothing touches the principal, which comes to $3,085 a month on the same loan, about $578 less.

That sounds attractive until you look at what it actually does over time. After 5 years of interest-only repayments, you still owe the full $600,000, having paid roughly $185,100 in interest and built zero equity. Over the same 5 years on P&I, the balance would have dropped to around $559,000, meaning about $40,500 of real equity built up alongside the interest you paid. When an interest-only period ends, repayments jump sharply because you now have to repay the full principal over whatever's left of the term.

Interest-only can genuinely make sense for property investors maximising tax-deductible interest, or for borrowers managing short-term cash flow pressure. For owner-occupiers, P&I from day one is almost always the better long-term call, you build equity faster, pay less total interest, and skip the repayment shock later. Our interest-only vs principal and interest guide covers the APRA rules and worked numbers in more depth.

How extra repayments can save you tens of thousands

Because interest is charged on your outstanding balance, every extra dollar you pay reduces the balance interest gets calculated on for every remaining month of the loan, not just the month you paid it. On our $600,000/6.17%/30-year example, here's what a handful of different extra monthly amounts do to the loan, run from day one:

• Extra $50/month: pays it off about 1.1 years sooner, saving roughly $32,200 in interest.
• Extra $100/month: about 2.1 years sooner, saving roughly $61,300.
• Extra $200/month: about 3.9 years sooner, saving roughly $111,700.
• Extra $300/month: about 5.5 years sooner, saving roughly $154,200.

That's the compounding effect at work: a lower principal means less interest charged next month, which means more of your regular repayment attacks the principal instead, which reduces it faster again. Try your own numbers in the Extra Repayments field above, the earlier in the loan you start, the bigger the effect, because there are more remaining months for the lower balance to keep saving you interest.

One thing worth checking before you commit to a large extra repayment: variable rate loans typically allow unlimited extra repayments at no cost, but most fixed rate loans cap extra repayments at $10,000 to $30,000 a year, and some charge a break fee if you exceed the cap or pay the loan out early. Always check your loan's terms first.

Offset accounts and redraw facilities

An offset account is one of the most powerful, and most misunderstood, tools available to Australian borrowers. Your offset balance is subtracted from your loan balance before interest is calculated, so $50,000 sitting in offset against a $600,000 loan means interest is only charged on $550,000, an immediate saving of roughly $257 a month. Your repayment amount doesn't change, but because less of it goes to interest, more attacks the principal, and the loan pays off faster. Keep a constant $50,000 in offset for the life of that 30-year loan and you'd save around $213,000 in interest and cut close to 5 years off the term. In practice most people's offset balance moves around, but even a partial offset effect adds up significantly over time.

A redraw facility works differently. Extra repayments go directly onto the loan and reduce the balance, the same interest-saving mechanism as offset, but that money becomes part of the loan itself. Accessing it later means requesting a redraw, which can involve delays, minimums or lender approval, unlike an offset balance which sits in an everyday account you can spend from instantly. For most owner-occupiers offset is the more flexible option, though some lenders charge a monthly fee for it, generally worth it once your balance is meaningful. Our offset account vs redraw guide digs into a tax trap that can bite if the property ever becomes an investment.

Tips to pay off your mortgage faster

• Switch to fortnightly repayments. It costs nothing and effectively adds an extra month's repayment a year, the easiest change most borrowers can make.
• Make extra repayments whenever you can. Tax refunds and bonuses are worth more paid onto a 6%+ mortgage than sitting in a savings account earning less.
• Use an offset account strategically. Park your salary and any savings you're not actively investing there, every dollar works at your mortgage rate around the clock.
• Refinance to a lower rate, then keep repayments the same. If your rate drops and your repayment falls too, resist pocketing the difference, keep paying the higher amount and send the gap straight to principal.
• Round up your repayments. Paying $3,800 instead of a $3,663 minimum is easy to set and forget, and it compounds meaningfully over 30 years.
• Review your loan every 2 to 3 years. Lenders regularly offer new customers better rates than existing ones, a short refinancing conversation every few years can save tens of thousands.

For the full playbook, including how these strategies stack against each other, see our guide to paying off your mortgage faster.