How is my mortgage repayment calculated?

Australian home loans use the standard amortisation formula M = P·r·(1+r)^n ÷ ((1+r)^n − 1), where P is the loan balance, r is the periodic interest rate (annual rate divided by the number of payments per year) and n is the total number of payments. Each repayment covers the interest charged on the current balance first, and whatever is left reduces the principal. As the balance falls, more of each repayment goes to principal.

Do fortnightly repayments pay off a home loan faster?

Usually, yes — but only if you pay half the monthly amount every fortnight. There are 26 fortnights in a year but only 12 months, so 26 half-payments equals 13 monthly payments — one extra month of repayments each year. That extra amount comes straight off the principal and can shave years off a 30-year loan. If you instead divide the monthly figure by 2.17 (26 ÷ 12), the saving disappears, because you are paying the same dollars per year.

How does an offset account reduce my interest?

A 100% offset account is a transaction or savings account linked to your home loan. The balance sitting in it is subtracted from your loan balance before interest is calculated each day. If you owe $600,000 and hold $30,000 in offset, you are charged interest as though you owe $570,000. Your scheduled repayment usually stays the same, so the saved interest is redirected to principal and the loan is paid off sooner. Unlike redraw, offset money stays liquid and is generally not counted as taxable income.

What interest rate should I use in the calculator?

Use the actual rate on your loan contract if you have one. If you are estimating, the calculator defaults to 6.90% p.a., an indicative average owner-occupier variable rate for mid-2026. The RBA's average new owner-occupier variable rate was roughly 5.9%–6.0% in early-to-mid 2026, while many existing borrowers and investors pay more. This is not the RBA cash rate, which was 4.35% in June 2026 — your loan rate sits well above the cash rate.

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

With principal and interest (P&I) every repayment chips away at both the interest and the amount you borrowed, so the balance falls and the loan is eventually cleared. With interest only (IO) you pay just the interest for a set period (typically 1–5 years), so repayments are lower but the balance does not reduce — and you pay more interest over the life of the loan. When the IO period ends, repayments jump because the full balance must be repaid over the remaining, shorter term.

How much can extra repayments save me?

Extra repayments go entirely against the principal, so they cut both the interest you pay and the time to clear the loan. On a $600,000 loan at 6.90% over 30 years, paying an extra $200 a month can save roughly five years and well over $100,000 in interest. The earlier in the loan you make them, the bigger the effect, because more interest is being charged on a larger balance. Check whether your loan allows free extra repayments — most variable loans do, many fixed loans cap them.

Mortgage Repayment Calculator

Work out your home-loan repayments, total interest and payoff time — then see how extra repayments, an offset account and a rate change move the numbers.

The straight answer

A $600k loan at 6.90% costs $3,952 a month — and $822,576 in interest over 30 years. An extra $100 a month claws back about $75,000 of that and clears the loan 2¼ years sooner. That's the whole game: extra dollars, early.

Loan amount The amount you’re borrowing (after deposit)

Interest rate (% p.a.) Default 6.90% = indicative avg variable rate, mid-2026

Loan term (years) Most AU loans are 25–30 years

Repayment frequency Fortnightly/weekly can pay off faster

Repayment type IO pays interest only — balance doesn’t fall

Extra repayment / period (optional) Added to every repayment; goes to principal

Offset account balance (optional) Reduces the balance interest is charged on

Rate-change scenario: +0.00% Slide to test a cut or rise around your rate

Estimate only — general information, not financial or credit advice. Figures are indicative; confirm with a lender or adviser.

What you're actually looking at

This tool estimates the regular repayment on a home loan and shows the bigger picture most lenders bury: the total interest you’ll pay, the total cost of the loan, and how long it actually takes to clear.

What you can stress-test

It then lets you stress-test the loan against the three levers that matter most in real life — extra repayments, an offset account, and a change in interest rates.

Everything recalculates the instant you change an input.
Save a shareable link so you don’t lose your scenario.

The maths, without the mystery

For a principal-and-interest loan, the repayment comes from the standard amortisation formula used by every lender:

M = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)

Interest first each period the lender charges balance × r
Principal next whatever’s left of your repayment reduces the balance
Snowball a smaller balance means less interest, so more of each repayment hits principal

P, r and n — and how each repayment splits

Here P is the loan balance, r is the periodic interest rate (your annual rate divided by the number of payments a year — 12 for monthly, 26 for fortnightly, 52 for weekly), and n is the total number of repayments (years × payments per year). If the rate is 0%, the formula simplifies to M = P ÷ n. Each period the lender charges interest of balance × r; the rest of your repayment (M − interest) reduces the principal. As the balance shrinks, the interest portion falls and the principal portion grows — that’s why early repayments are mostly interest and late repayments are mostly principal.

Interest only (IO)

Interest only (IO): the repayment is simply balance × r — you pay the interest and nothing else, so the balance never moves. Repayments are lower, but you pay more interest overall and the debt is still there at the end of the IO period.

Extra repayments

Extra repayments are added to every scheduled payment and applied entirely to principal. We then re-run the loan period by period until the balance hits zero, which gives you the new (shorter) payoff time and the interest you’ve saved versus the standard schedule.

Offset

Offset: a 100% offset account reduces the balance interest is charged on. We treat the offset as a constant amount subtracted from your balance each period (interest = max(balance − offset, 0) × r), while keeping your repayment the same — so the freed-up money attacks the principal faster. Real offsets fluctuate daily with your spending, so treat this as the “if the balance stays put” case.

The rate-change slider

The rate-change slider recomputes the scheduled P&I repayment at −0.50%, −0.25%, your rate, +0.25% and +0.50%, and shows the dollar difference per period — handy for sizing up an RBA move or a lender’s out-of-cycle change before it lands.

$3,952

monthly repayment — $600k at 6.90% over 30 yrs

$822,576

total interest over the full 30 years

~$75,000

interest saved by an extra $100 a month

2¼ yrs

sooner paid off with that same extra $100

The point: extra dollars land hardest early, while the balance is big.

Where the estimate ends

This is an estimate, not a quote.

What it assumes

A single fixed rate for the whole term — most loans are variable and will move many times over 25–30 years
Every repayment made in full and on time
A regular calendar — lenders calculate daily interest on the actual number of days, so your statements will differ by a few dollars

What it ignores

Establishment fees and ongoing or monthly account fees
Lenders mortgage insurance (LMI) and redraw rules
The rate “revert” jump that hits when a fixed or interest-only period ends
Fixed-loan extra-repayment caps — many limit you to a few thousand dollars a year before break costs apply

The local tricks worth real money

A few things are distinctly Australian — and they’re worth real money.

Fortnightly, done right

Pay half the monthly amount every fortnight
26 fortnights vs 12 months = the equivalent of 13 monthly payments a year
One extra month, every year, straight off your principal — a quiet accelerator

Fortnightly, done wrong

Pay the “true equivalent” (monthly ÷ 2.17)
Same dollars per year — the bonus disappears
Watch how your lender frames it

One number people mix up constantly: the RBA cash rate was 4.35% in June 2026, but that's not your loan rate. Owner-occupier variable rates actually sat around 5.9%–6.9% — lenders add their margin on top. Model your contract rate, then stress-test a rise with the slider.

Why offsets beat savings accounts here

Offset accounts are nearly universal here and are one of the most tax-effective ways to get ahead, because the “return” (interest saved) isn’t taxable income the way savings-account interest is.

Your call

Extra repayments beat rate-chasing for most people — a permanent $100 a month does more than a hard-won 0.1% discount, and you don't have to refinance to get it. See the term cut above, then set the extra payment and forget it. If your loan charges you to make extra repayments, that's the loan to leave.

Frequently asked questions

How is my mortgage repayment calculated?: Australian home loans use the standard amortisation formula M = P·r·(1+r)ⁿ ÷ ((1+r)ⁿ − 1), where P is the loan balance, r is the periodic interest rate (annual rate divided by the number of payments per year) and n is the total number of payments. Each repayment covers the interest charged on the current balance first, and whatever is left reduces the principal. As the balance falls, more of each repayment goes to principal.
Do fortnightly repayments pay off a home loan faster?: Usually, yes — but only if you pay half the monthly amount every fortnight. There are 26 fortnights in a year but only 12 months, so 26 half-payments equals 13 monthly payments — one extra month of repayments each year. That extra amount comes straight off the principal and can shave years off a 30-year loan. If you instead divide the monthly figure by 2.17 (26 ÷ 12), the saving disappears, because you’re paying the same dollars per year.
How does an offset account reduce my interest?: A 100% offset account is a transaction or savings account linked to your home loan. The balance sitting in it is subtracted from your loan balance before interest is calculated each day. If you owe $600,000 and hold $30,000 in offset, you’re charged interest as though you owe $570,000. Your scheduled repayment usually stays the same, so the saved interest is redirected to principal and the loan is paid off sooner. Unlike redraw, offset money stays liquid and is generally not counted as taxable income.
What interest rate should I use in the calculator?: Use the actual rate on your loan contract if you have one. If you’re estimating, the calculator defaults to 6.90% p.a., an indicative average owner-occupier variable rate for mid-2026. The RBA’s average new owner-occupier variable rate was roughly 5.9%–6.0% in early-to-mid 2026, while many existing borrowers and investors pay more. This is not the RBA cash rate, which was 4.35% in June 2026 — your loan rate sits well above the cash rate.
What is the difference between principal & interest and interest only?: With principal and interest (P&I) every repayment chips away at both the interest and the amount you borrowed, so the balance falls and the loan is eventually cleared. With interest only (IO) you pay just the interest for a set period (typically 1–5 years), so repayments are lower but the balance doesn’t reduce — and you pay more interest over the life of the loan. When the IO period ends, repayments jump because the full balance must be repaid over the remaining, shorter term.
How much can extra repayments save me?: Extra repayments go entirely against the principal, so they cut both the interest you pay and the time to clear the loan. On a $600,000 loan at 6.90% over 30 years, paying an extra $200 a month can save roughly five years and well over $100,000 in interest. The earlier in the loan you make them, the bigger the effect, because more interest is being charged on a larger balance. Check whether your loan allows free extra repayments — most variable loans do, many fixed loans cap them.

General information only — an estimate, not financial, tax, credit or legal advice. Figures current as at FY2025-26, reviewed June 2026. Confirm with the ATO / your lender / the relevant state revenue office.

Sources:

Reserve Bank of Australia — Cash Rate Target (4.35%, June 2026)

RBA — Lenders’ Interest Rates (average owner-occupier variable rate)

Canstar interest-rate outlook 2026

Repayment formula: standard loan amortisation.