Mortgage Payment Calculator

How the repayment is derived

A principal-and-interest loan is an annuity: a fixed payment that clears both the interest and the balance over a set number of periods. The payment is the amount whose present value equals the loan, which rearranges into the formula this calculator uses. The monthly rate is the annual rate divided by 12, and the number of payments is the term in years multiplied by 12.

Because the rate is divided by 12, the annual cost is slightly higher than the nominal rate suggests: 6 per cent nominal compounded monthly is 6.17 per cent effective. Australian and UK lenders advertise a comparison rate or APR that folds fees in, which is the number worth comparing between offers.

What the term does to the cost

On a $600,000 loan at 6 per cent, the monthly figure changes far less than the total interest does. A shorter term raises the repayment but removes years of interest, which is why the difference between a 30-year and a 15-year loan is larger than most people expect.

Why early repayments are mostly interest

Interest is charged on the outstanding balance, so it is largest at the start. In month one of that 30-year loan the balance is $600,000 and the interest charge is $3,000, leaving only $597 of the payment to reduce the principal. By the final year the balance is small, the interest charge is tiny, and almost the entire payment is principal.

That shape explains why extra repayments early are worth more than the same money later, and why an offset account works: money sitting against the loan lowers the balance interest is charged on, without locking the cash away.

The inputs that actually move the result

• The rate: a 1 point rise on a large loan usually costs more per month than a decade of smaller decisions.
• Extra repayments: even $100 a month cuts years off a long loan because it hits principal from month one.
• Repayment frequency: fortnightly repayments make 26 half-payments a year, which is one extra monthly payment annually.
• Fees and charges: application, valuation, settlement and ongoing fees are not in the formula, so add them separately.
• Loan-to-value ratio: above 80 per cent, lenders mortgage insurance is often added to the balance.
• Fixed versus variable: a fixed rate buys certainty, not necessarily the lowest total cost.

This is a planning tool. Approval depends on serviceability, credit history, lender policy and the property itself, none of which a formula can assess.

What each input means

The calculator asks for 4 pieces of information. Every field is validated before the maths runs, so an impossible value is refused rather than quietly producing a wrong answer.

A worked example using the default inputs

With home price of 480000, deposit of 96000, interest rate of 6.15 %, loan term of 30 years, the calculator returns $2,339.44 per month.

The same arithmetic runs whatever you type into the form above, so you can reproduce any figure by matching the inputs listed here.

How this is calculated

M = P × i ÷ (1 − (1 + i)^−n), where P is the amount borrowed, i is the monthly rate (annual rate ÷ 12 ÷ 100) and n is the number of monthly payments.

Working values are kept at full precision and rounded only for display. Impossible dates, zero denominators, negative amounts where they make no sense, and out-of-range values are rejected before any result is shown.

The methods behind these money tools

Almost everything in this section is one of six calculations. Once you know which one a tool is running, the result stops being a black box: you can check it roughly on paper, and you can see which input is doing the work.

Two conventions matter more than any formula. First, the rate and the period must match: a 6% annual rate over monthly payments is 0.5% per month and 360 periods, not 6% per period. Second, money paid later is worth less than money paid now, which is why an amortising loan charges interest on the opening balance of each period rather than on the average balance.

Nominal and real returns are different things. A 7% return with 3% inflation buys roughly 3.9% more each year, not 7%: real rate ≈ (1 + nominal) ÷ (1 + inflation) − 1.

Two worked examples from this section

These scenarios use the same arithmetic as the tools above, so you can follow the numbers from input to result and then repeat them with your own figures.

A 30-year mortgage of $600,000 at 6.1%

The monthly rate is 6.1% ÷ 12 ≈ 0.5083% and there are 360 payments. Feeding those into the amortising payment formula gives a fixed instalment of about $3,636.

Monthly principal and interest

≈ $3,636

Total repaid over 30 years

≈ $1,308,900

Interest paid in total

≈ $708,900

Share of the total that is interest

≈ 54%

Notice that more than half of everything paid is interest. That is the single most useful fact a mortgage calculator produces, and it is why a small change in rate or term moves the total so much more than it moves the monthly figure.

Adding and removing 10% GST on $250

Adding tax is a multiplication; removing it is a division by the same factor, never a subtraction of the same percentage. Subtracting 10% from a GST-inclusive price gives the wrong answer because the tax was charged on the smaller, exclusive amount.

$250 plus 10% GST

$275.00

GST component

$25.00

$275 with GST removed (275 ÷ 1.1)

$250.00

The common mistake (275 − 10%)

$247.50 — too low

The same split works for any rate: divide by one plus the rate to go backwards. For 15% VAT, divide by 1.15; for 18% GST, divide by 1.18.

Assumptions behind every finance figure

Results are computed in exact arithmetic and only rounded for display, so a payment shown as $2,413.65 comes from the unrounded monthly rate rather than from a rounded one. Where a calculator compounds, it compounds at the frequency you choose; where it amortises, it assumes payments land at the end of each period unless the tool says otherwise.

Tax and contribution rates are the legislated rates for the tax year noted in each tool. They change, sometimes retrospectively, and none of these tools can see your personal circumstances: deductions, offsets, salary sacrifice, HELP or student loan balances, private health cover, investment losses, provincial or state tax, and treaty arrangements are all outside the model.

• Lenders and tax offices round differently from us, and they use daily interest, fees and assessment rules that a formula cannot reproduce. Expect small differences from an official statement.
• Nominal returns are not real returns. A 7% return with 3% inflation buys about 3.9% more each year, not 7%.
• Every figure is a planning estimate. For a decision with money at stake, confirm it with the lender, the tax office or a licensed adviser.

Sources and further reading

• Reserve Bank of Australia: housing lending rates
• Australian Taxation Office: tax rates and codes
• Moneysmart (ASIC): budgeting and borrowing