Loan Repayment Calculator

How are loan repayments calculated?

A principal and interest loan is repaid in equal instalments. Each one covers the interest charged since the last repayment, and whatever is left over reduces the balance. Early on, most of each repayment is interest; by the end, almost all of it is principal. The repayment amount is set so the final instalment lands the balance exactly at zero.

This calculator applies your annual rate divided by the number of repayments per year (12 monthly, 26 fortnightly or 52 weekly), which is the same approach as the MoneySmart mortgage calculator. Your lender may round differently or charge interest daily, so expect small differences of a few dollars.

Weekly, fortnightly or monthly?

Repaying more often trims a little interest, because the balance drops sooner within each month. The effect on its own is modest.

The well-known “fortnightly trick” works differently. Some lenders set the fortnightly repayment at half the monthly amount. Because there are 26 fortnights in a year but only 12 months, you end up paying the equivalent of 13 monthly repayments each year. That extra month’s worth of repayments can cut several years off a 30-year loan. To model it here, switch to monthly, halve the repayment shown, then switch to fortnightly and enter the difference as an extra repayment.

Principal & interest vs interest-only

With principal and interest, every repayment chips away at the loan. With interest-only, you pay just the interest for an agreed period, usually one to five years, and the balance stays where it started. Repayments are lower during that period, which is why investors often choose it while the interest is tax-deductible.

The catch is what happens afterwards. When the interest-only period ends, the whole balance has to be repaid over the years that remain, so repayments jump, and the total interest over the life of the loan is higher. Toggle the calculator above to see both figures for your loan.

How much do extra repayments save?

Every extra dollar you pay reduces the balance immediately, so it stops accruing interest for the rest of the loan. That is why small, regular extras have an outsized effect: on a $500,000 loan at 6% over 30 years, an extra $500 a month saves close to $200,000 in interest and clears the loan about nine years early.

An offset account does the same job. Money sitting in an offset is subtracted from the balance before interest is calculated, so $20,000 in offset saves the same interest as a $20,000 lump-sum repayment, but you can still spend it. Most variable-rate loans allow unlimited extra repayments; fixed-rate loans often cap them, so check your contract.

Which loans can I use this for?

Any loan with regular repayments and a fixed term: home loans and mortgages, investment property loans, personal loans, car loans and renovation loans. For a home loan, enter the amount you will borrow after your deposit. Remember that a deposit under 20% usually means paying Lenders Mortgage Insurance, and every purchase attracts stamp duty, neither of which is included here.

What this calculator does not include

• Application, settlement, valuation and ongoing package fees
• Lenders Mortgage Insurance and stamp duty
• Rate changes over the term (a 30-year loan will see many), or the end of a fixed-rate period
• Offset balances and redraw, other than as an extra repayment
• Tax deductibility of interest on investment loans

To see how a loan fits with the rest of your finances, including rate rises, super, tax and the property’s value over time, try the JettWorth play mode — no sign-up required.

Frequently asked questions

How are loan repayments calculated?

Repayments are calculated so that the same amount, paid every period for the whole term, exactly clears the balance plus the interest that accrues along the way. This calculator uses the standard amortisation formula, applying the annual rate divided by the number of repayments per year (12 monthly, 26 fortnightly or 52 weekly).

Are fortnightly repayments cheaper than monthly?

Slightly. Paying every fortnight means the balance drops a little earlier each month, so a bit less interest accrues. The bigger saving comes if your lender calculates the fortnightly repayment as half the monthly one, which means you make the equivalent of 13 monthly repayments a year and pay the loan off years sooner.

What is the difference between principal and interest and interest-only?

With principal and interest, every repayment covers the interest charged plus a slice of the loan itself, so the balance falls over time. With interest-only, you pay only the interest for a set period (usually 1-5 years) and the balance stays the same. When that period ends, repayments rise because the whole loan must be repaid over the years that remain.

How much do extra repayments save?

Every extra dollar goes straight to the balance, so it stops accruing interest for the rest of the loan. On a $500,000 loan at 6% over 30 years, an extra $500 a month saves close to $200,000 in interest and pays the loan off about nine years early. Enter your own figures above to see the effect.

Does this calculator include fees, LMI or stamp duty?

No. It shows repayments on the amount borrowed only. Application fees, ongoing fees, Lenders Mortgage Insurance and stamp duty are separate. Use the JettWorth stamp duty and LMI calculators to estimate those upfront costs.

Important: this is not financial advice

JettWorth is an insights platform, not a licensed financial adviser or credit provider. Figures shown here are estimates based on the inputs you enter and standard formulas. Your lender’s actual repayments will depend on their rate, fees, rounding and how they calculate interest. Always confirm with your lender, a mortgage broker or a qualified financial adviser before acting on what you see here.