How is a mortgage repayment calculated?

Monthly repayment = P × [r(1+r)^n] / [(1+r)^n - 1], where P is the loan principal, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments (years × 12). This formula ensures equal payments throughout the loan term with the balance reaching zero at maturity.

What is an amortisation schedule?

An amortisation schedule is a complete table showing how each repayment is split between principal and interest over the life of the loan. In the early years, most of each repayment covers interest. As the balance reduces, more of each repayment goes toward principal. This calculator generates a full year-by-year amortisation table with CSV export.

Mortgage Repayment Calculator Australia 2026 | Amortisation, Offset & Extra Repayments

Loan Details

Loan Amount Total amount borrowed (purchase price minus deposit)

Annual Interest Rate Current AU variable ~6-7%. Check your lender for exact rate.

6.50%

Loan Term

yrs

30 yrs

Repayment Type

Repayment Frequency

Optional: Extra Repayments & Offset

Extra Monthly Repayment Additional amount above minimum each month

Offset Account Balance Reduces principal on which interest is charged

✓ Savings from Extra Repayments & Offset

Repayment Summary

Monthly Repayment

P&I

Fortnightly

Equivalent

Weekly

Equivalent

Total Repayments

Full term

Total Interest

Cost of borrowing

Interest-to-Loan Ratio

Interest / Principal

Loan Visualisation

Year-by-Year Amortisation Schedule

Year	Opening Balance	Principal Paid	Interest Paid	Extra Repayments	Closing Balance

How It Works

Understanding Your Mortgage

A mortgage is typically the largest financial commitment most Australians make. Understanding how repayments are calculated, how interest accrues, and how strategies like offset accounts and extra repayments can save significant money is essential for every homeowner and investor.

The Mortgage Repayment Formula

M = P × [r(1+r)^n] / [(1+r)^n - 1]

Where: M = Monthly repayment P = Loan principal (amount borrowed) r = Monthly interest rate (annual rate ÷ 12) n = Total number of monthly payments (years × 12) Example: $600,000 loan at 6.5% p.a. over 30 years r = 0.065 ÷ 12 = 0.005417 n = 30 × 12 = 360 M = $600,000 × [0.005417 × (1.005417)^360] / [(1.005417)^360 - 1] M = $3,792 per month

How Offset Accounts Work

An offset account is a transaction account linked to your mortgage. The balance in the offset account is deducted from your outstanding loan balance before interest is calculated each month. You pay interest on the net balance only.

Monthly Interest = (Loan Balance - Offset Balance) × (Annual Rate ÷ 12)

Example: $600,000 loan, $50,000 offset, 6.5% p.a. Without offset: $600,000 × (0.065÷12) = $3,250/month interest With offset: $550,000 × (0.065÷12) = $2,979/month interest Monthly saving: $271 → Annual saving: $3,252 Over 30 years: saves ~$90,000 in interest, cuts ~3 years off loan

Fortnightly vs Monthly Repayments

Switching from monthly to fortnightly repayments is one of the simplest ways to pay off your mortgage faster. There are 26 fortnights in a year, so fortnightly repayments (half the monthly amount) result in the equivalent of 13 monthly payments per year instead of 12 — one extra payment per year at no extra perceived cost.

Example: $600,000 loan at 6.5% p.a. over 30 years. Monthly repayment: $3,792.

Fortnightly repayment: $1,896 (= $3,792 ÷ 2), paid 26 times per year.

Result: Loan paid off approximately 4.5 years early. Total interest saved: approximately $80,000.

Extra Repayments: The Compounding Effect

Extra repayments directly reduce the principal, which reduces the interest charged in every subsequent month. This creates a compounding savings effect — the earlier you make extra repayments, the greater the impact.

Scenario: $600,000 loan at 6.5% p.a. over 30 years. Monthly repayment: $3,792.

With $500/month extra: Total repayment $4,292/month.

Result: Loan paid off in approximately 23 years (7 years early). Total interest saved: approximately $130,000.

Key insight: An extra $500/month on a $600,000 mortgage saves more than $130,000 in interest — a 26x return on the extra capital deployed.

P&I vs Interest-Only: Key Differences

Feature	Principal & Interest (P&I)	Interest Only (IO)
Monthly repayment	Higher (covers principal + interest)	Lower (interest only)
Principal reduction	Yes, from day one	No, balance stays flat
Total interest cost	Lower over full term	Higher — no principal reduction
Common use	Owner-occupiers	Investment properties (tax deduction)
Risk	Lower — equity builds over time	Higher — no equity built during IO period
After IO period	N/A	Repayments jump significantly (P&I on remaining term)

Australian Mortgage Market Context

The RBA cash rate directly influences variable mortgage rates. As of early 2026, variable rates are approximately 6-7% p.a. for owner-occupiers.
The average Australian mortgage is approximately $600,000-$700,000 in major cities.
APRA requires lenders to stress-test borrowers at 3% above the current rate (the "serviceability buffer").
Mortgage offset accounts are a uniquely Australian product — they are not common in the US or UK.
Investment property loans typically attract a higher interest rate (0.2-0.5% p.a.) than owner-occupier loans.

This calculator is for educational and illustrative purposes only. It does not constitute financial advice. Consult a licensed mortgage broker or financial adviser before making borrowing decisions. Calculations assume a constant interest rate over the full loan term.

Common Questions

Frequently Asked Questions

Monthly repayment = P × [r(1+r)^n] / [(1+r)^n - 1], where P is the loan principal, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments. This formula ensures equal payments throughout the loan term with the balance reaching zero at maturity.

An amortisation schedule is a complete table showing how each repayment is split between principal and interest over the life of the loan. In the early years, most of each repayment covers interest because the outstanding balance is high. As the balance reduces, more of each repayment goes toward principal. This calculator generates a full year-by-year amortisation table with CSV export.

An offset account reduces the principal on which interest is calculated each month. If you have a $600,000 loan and $50,000 in an offset account, you only pay interest on $550,000. At 6.5% p.a., this saves $271/month in interest. Over 30 years, a $50,000 offset account can save over $90,000 in interest and cut approximately 3 years off the loan.

Principal & Interest (P&I) repayments reduce both the loan balance and interest each month. Interest-only (IO) repayments only cover the interest, so the principal does not reduce. IO periods are common for investment properties but result in higher total interest costs and higher repayments when the IO period ends.

Switching from monthly to fortnightly repayments means you make 26 half-payments per year instead of 12 full payments — effectively one extra monthly payment per year. On a $600,000 loan at 6.5% over 30 years, fortnightly repayments can save approximately $80,000 in interest and cut 4-5 years off the loan term.

As of early 2026, Australian variable home loan rates are approximately 6-7% p.a. for owner-occupiers. Fixed rates vary by term. The RBA cash rate directly influences variable mortgage rates. Check the RBA website and your lender for current rates.

Most Australian lenders require a minimum 20% deposit to avoid Lenders Mortgage Insurance (LMI). Some lenders accept 5-10% deposits with LMI. The First Home Guarantee scheme allows eligible first home buyers to purchase with as little as 5% deposit without LMI.

APRA (Australian Prudential Regulation Authority) requires lenders to assess whether borrowers can afford repayments at 3% above the current interest rate. This is the "serviceability buffer." If your current rate is 6.5%, lenders must verify you can afford repayments at 9.5%.

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Mortgage RepaymentCalculator