Learn more about repayments
How do they work?
Home loan repayments are usually comprised of two parts: the principal and the interest.
Principal: This is the amount you borrow to purchase a property.
Interest: This is the cost charged by the lender for borrowing that money.
You can choose between a home loan with Principal and Interest (P&I) repayments, or an Interest Only (IO) home loan. Most home loans in Australia use P&I repayments, which gradually reduce your loan balance over time.
An IO home loan includes a period where your repayments cover only the interest, not the principal. This means your repayments are lower in the short term, but your loan balance does not reduce during the interest only period.
How do you calculate home loan repayments?
Your repayment amount will depend on several key factors. When you use the Home Loan Repayment Calculator, the following details will help you get an estimate of your home loan repayments:
- Loan amount: The total amount you are borrowing.
- Loan term: The number of years you plan to repay the loan.
- Interest rate: Whether it is a fixed rate or variable rate home loan.
- Repayment type: Principal and Interest or Interest Only.
- Extra repayments: Any additional repayments you choose to make to reduce your loan balance faster.
Because interest rates can change, your repayment estimate may vary over time. Variable rate loans may increase or decrease depending on rate movements. Fixed rate loans stay the same during the fixed period, then revert to a variable rate which may change your repayments. The Home Loan Repayment Calculator provides an estimate only and does not include all interest rates, fees or charges.
This information can help you compare home loan options and understand how changes in loan amount, loan term and interest rates affect your mortgage repayments.
Home Loan FAQs
Repayments are based on your loan amount, interest rate, loan term, and repayment type (principal and interest or interest only).
For a principal and interest home loan, part of each repayment reduces the principal, the borrowed amount, while the other part goes towards the interest, the cost of borrowing.
For an interest only home loan, repayments initially only cover the interest due for a set term, typically up to 5 years. To learn more, click here.
Most variable rate loans allow extra repayments at any time. Fixed rate loans may have limits, and some lenders may charge fees for additional payments.
You may incur late fees and additional interest. It can also affect your credit history. Contact our Customer Care Team on 13 10 19 from 7am - 7pm AEST Monday to Friday as soon as possible if you think you will miss a payment.
Yes. At loans.com.au, you can choose weekly, fortnightly, or monthly repayments. Switching to more frequent repayments may help reduce interest over the life of the loan.
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Kathryn
Lending Specialist
Real people, based in Brisbane, Australia
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