How to calculate a home loan repayment in Australia:
Estimating your loan repayments using the Entry Conveyancing calculator is simple – all you need to do is input the following information:
- Loan amount
- Interest rate
- Loan term
- Payment frequency
- Loan type (principal and interest or interest-only loan)
Using this information, we will provide you with the estimated weekly, fortnightly, or monthly repayments – as well as the total interest payable on the loan. To determine the total amount you will pay of the duration of the loan, simply combine the original loan amount that you put into the calculator with the total interest payable.
The loan term and the repayment frequency (whether weekly, fortnightly, or monthly) will also affect how much you pay in total. When you reduce the loan term and pay off your loan sooner, you will pay a lot less interest over time. Yes, the repayments will be a lot higher in this time, but if you are able to afford it, you will save yourself a lot.
The benefits of using a loan repayment calculator
When you’re taking out a mortgage, a loan repayment calculator is an essential tool in the planning process. A customisable and intuitive calculator like ours allows you to generate an estimated figure of your repayments (based on several variables) and budget accordingly. Once you understand what your regular loan repayments will look like, you’ll know how much you need to save, and what you can afford to spend. The calculator also allows you to stimulate different scenarios to see the impact of changing interest rates on your loan repayments, so you have more awareness around that.
Frequently asked questions
What is the difference between an interest-only and a principal and interest loan?
With a principal and interest loan – you are required to pay off a portion of the borrowed amount (the principal) and the interest with every repayment. As a result – you gradually reduce your outstanding balance from day one by making more significant repayments each time.
On the other hand – an interest-only loan is precisely what it sounds like – meaning for a certain period, you only pay the interest with your weekly, fortnightly, or monthly repayments. Of course, you will eventually have to pay off the principal amount too – often leading to larger repayments in the future – so make sure that you budget appropriately for that eventuality.
Is it better to make weekly, fortnightly, or monthly repayments?
There is no best way to pay off a loan – it is all about choosing the frequency that matches your financial capabilities and aspirations.
However, it is important to know that the payment frequency does significantly impact the total interest that you’ll pay over the duration of your loan. It makes sense – interest accrues daily, so the more frequently you can make repayments, and the quicker you pay off the loan, the less total interest you will pay.
For some people, weekly repayments are not an option, though. It will ultimately depend on your cash flow and budgeting preferences. Commonly, people will align their loan repayments with their work pay cycle – to help manage their finances and ensure there are no issues with the payment.
What are the repayments on a $400,000 loan in Australia?
Let’s look at an example to highlight further how simple and practical the loan repayment calculator is. In this scenario:
- The loan amount is $400,000
- It is a principal and interest home loan
- The loan term is 25 years
- The interest rate is 4%
The repayments on this loan would be as follows:
- Monthly – $2,111
- Fortnightly – $974
- Weekly – $487.
However, if this were an interest-only loan (keeping all other variables the same), the repayments would be:
- Monthly – $1,333
- Fortnightly – $615
- Weekly – $308.
How can I repay my loan sooner?
There are many ways that you can pay off your loan sooner, including:
- Increasing your repayment frequency to help reduce the principal balance faster.
- Making one-off or regular extra payments when you get a surge in income (if your loan agreement allows you to).
- Choosing a principal and interest loan rather than an interest-only loan.
- An offset account can further reduce the interest payable, enabling quicker repayment of the principal amount.