Mortgage Repayment Calculator Australia
Understanding your mortgage repayments is the first step in budgeting for a property purchase. This guide explains how repayments are calculated, compares current Australian rates by lender type, and provides worked examples so you can estimate your monthly costs before applying.
How Mortgage Repayments Are Calculated
Australian home loans typically use the principal and interest (P&I) amortisation formula to calculate monthly repayments. The formula ensures each payment covers the interest charged for that month plus a portion of the loan principal, so the loan is fully repaid by the end of the term.
P&I Monthly Repayment Formula
M = P x [r(1 + r)^n] / [(1 + r)^n - 1]
- M = monthly repayment
- P = loan principal (amount borrowed)
- r = monthly interest rate (annual rate / 12)
- n = total number of monthly payments (loan term in years x 12)
In the early years of a loan, the majority of each repayment goes toward interest. As the principal decreases over time, a larger share of each payment reduces the balance. This is why extra repayments early in the loan term have such a powerful compounding effect.
Current Average Rates by Lender Type
Mortgage rates in Australia vary depending on the lender type, loan-to-value ratio (LVR), and whether you choose a fixed or variable rate. The table below shows indicative average rates as of early 2026 for owner-occupier P&I loans with an LVR of 80% or below.
| Lender Type | Variable Rate | 2-Year Fixed | Features |
|---|---|---|---|
| Major Bank | 6.10% - 6.40% | 5.80% - 6.20% | Offset, redraw, branches |
| Online Lender | 5.70% - 6.10% | 5.50% - 5.90% | Lower fees, limited branches |
| Credit Union | 5.90% - 6.30% | 5.60% - 6.10% | Member-owned, competitive fees |
| Non-Bank Lender | 5.80% - 6.20% | 5.60% - 6.00% | Competitive rates, flexible criteria |
Rates are indicative and change frequently. Always check directly with lenders for current pricing. Comparison rates, which include most fees and charges, may be higher than advertised headline rates.
Worked Examples: Monthly P&I Repayments
The table below shows estimated monthly principal and interest repayments for common loan amounts over a 30-year term at three different interest rates.
| Loan Amount | @ 5.5% | @ 6.0% | @ 6.5% |
|---|---|---|---|
| $400,000 | $2,271 | $2,398 | $2,528 |
| $600,000 | $3,407 | $3,597 | $3,793 |
| $800,000 | $4,543 | $4,796 | $5,057 |
| $1,000,000 | $5,679 | $5,996 | $6,321 |
Based on a 30-year loan term with monthly P&I repayments. Does not include fees, insurance, or other charges.
P&I vs Interest-Only Repayments
Interest-only (IO) loans are popular with property investors because the lower initial repayments improve short-term cash flow. However, they cost significantly more over the life of the loan. Here is a side-by-side comparison for a $600,000 loan at 6.0%.
| Metric | P&I (30 years) | IO 5 years, then P&I 25 years |
|---|---|---|
| Monthly repayment (initial) | $3,597 | $3,000 |
| Monthly repayment (after IO period) | $3,597 | $3,865 |
| Total interest paid | $695,000 | $839,000 |
| Extra interest cost | - | +$144,000 |
The IO option saves $597/month during the initial 5-year period, but the loan balance remains at $600,000 the entire time. Once the IO period ends, repayments jump to $3,865/month (higher than the P&I option) because you now have to repay the full principal over only 25 years. Total extra interest: approximately $144,000.
Impact of Extra Repayments
Making even modest extra repayments can dramatically reduce your total interest and loan term. Extra repayments go directly toward reducing the principal, which means less interest is charged in every subsequent period.
Worked Example: $200/month Extra on a $600,000 Loan
Loan: $600,000 at 6.0% over 30 years. Minimum monthly repayment: $3,597.
| Scenario | Monthly Payment | Loan Term | Total Interest |
|---|---|---|---|
| Minimum repayments only | $3,597 | 30 years | $695,000 |
| + $200/month extra | $3,797 | 25 years 5 months | $602,000 |
| + $500/month extra | $4,097 | 22 years 2 months | $527,000 |
$200/month extra saves
~$93,000 in interest & 4 years 7 months off the loan
$500/month extra saves
~$168,000 in interest & 7 years 10 months off the loan
Tips for Reducing Your Mortgage Repayments
- 1.Negotiate your rate. Even 0.25% lower on a $600,000 loan saves over $30,000 in total interest. Call your lender annually and ask for a rate review, especially if competitors are offering better deals.
- 2.Use an offset account. Money in a 100% offset account reduces the balance on which interest is calculated. Keeping $50,000 in offset on a $600,000 loan at 6.0% saves approximately $3,000 per year in interest.
- 3.Switch to fortnightly repayments. Paying half your monthly repayment every two weeks results in 26 half-payments (13 full payments) per year instead of 12, knocking years off your loan.
- 4.Refinance when it makes sense. If your loan is more than 2-3 years old and rates have moved, refinancing to a lower rate could save thousands. Factor in any break costs, discharge fees, and application fees when comparing.
- 5.Avoid unnecessary features. Not everyone needs a package deal with a credit card and insurance. A basic no-frills variable loan often has the lowest rate and fewest ongoing fees.
Analyse Your Property Purchase
Realestate Lens helps you understand the full financial picture when buying property — including mortgage costs, stamp duty, legal fees, and hidden risks in the contract.
Try Free — 2 Analyses Included