Home Loan Calculators
Featured Variable Rate Home Loan
State Custodians Standard Variable Offset Loan features unlimited free redraw and 100% free interest offset account. Awarded the 2011 Non bank Lender of the Year
- Interest Rate of 6.37%
- Comparison Rate of 6.57%
- Application Fee of $0
- Maximum LVR With LMI: 95%
- Minimum Borrowing: $150,000
- Maximum Borrowing: $1,000,000
- Mortgage Repayment Calculator: Budget for your home loan by determining your weekly, fortnightly or monthly repayments.
Just about every home loan lender will have a calculator on their website and there are plenty of independent online tools which you can use to calculate how much you can borrow to buy a home of your dreams, and whether you have to adjust those dreams for now to suit your current budget. While a home loan calculator can give you a good idea of what you can borrow according to your income, your savings and your other debts using home loan calculators should not be done in a vacuum and you should also seek advice from financial professionals.
The Number Of Days In A Month Varies
Unfortunately an online home loan calculator will make its calculations of your monthly repayments and interest charges on months which are of equal length. However your home loan is likely to calculate interest daily regardless of whether you make your payments weekly, fortnightly or monthly and the number of days in a month affects how much interest you pay but home loan calculators don’t tend to take into account.
The Number Of Weeks And Fortnights In A Year
Again many on-line calculators are assuming that a year contains exactly 52 weeks and therefore exactly 26 fortnights however this assumption calculates to a year which has 364 days when years have either 365 or 366 days.
Rounded Repayments
On your actual home loan your repayment amounts will be rounded to the nearest cent however a home loan calculator will provide you with unrounded repayment amounts to show the amount of interest you pay over the full term of the loan. Using the unrounded figures means that the calculator can produce a smooth grass of equal repayment amounts.
Fixed Interest Repayments
When you choose the loan term which suits you your repayments are calculated according to how much you need to pay to repay your debts in full by the end of this period. As such the value of your repayments after the end of a fixed rate period is determined by the remaining loan term. For example if you have chosen an original loan term of 25 years and a fixed interest rate period of three years then the remaining loan term at the end of the fixed-rate period is 22 years. However this calculator assumption can mean that the amounts of interest charged are inaccurate as the calculations of a combination of fixed and variable interest rates will show differing values compared to if you had calculated your repayments on just a variable interest rate even if the fixed rate you enter is equal to the variable rate used. For each scenario the interest charged is then rounded to the nearest dollar by the calculator.
Knowing how much you can afford to borrow is about much more than how much you can be approved for because it is important to make sure that your home loan repayments fit comfortably within your current budget and there is space in case interest rates rise, emergencies arise or your circumstances change.
Using Home Loan Calculators to Your Advantage
There are several ways you can use home loan calculators to your advantage. Aside from using them for working out how much your payments will be, you can also use them to reduce your loan term and cut down the total amount of interest you pay over the course of your mortgage.
Here are some quick examples to show you how this works.
Reducing Mortgage Term
Paying even a little extra on top of your minimum monthly payment on your home loan can help you pay your loan off faster, but it can also reduce the term or your mortgage.
Compare Interest Rates and Calculate Your Repayments
To find out how much time you could shave off the end of your home loan, find one of the many online home loan calculators available and put in the amount you intend to pay off your mortgage over and above the minimum.
The calculation should show you an amended loan term that is shorter than the original 30 year contract you signed.
Reducing The Amount of Interest You Pay
Home loan repayment calculators are usually designed to show you the total amount of interest you’ll pay over the term of your mortgage.
If you’re currently paying the bare minimum payment each month, the amount of money you’ll end up repaying the bank is easy to work out.
Monthly payment x 360 months = total amount you’ll pay to the bank.
Try this with a regular calculator. The result will surprise you! You see, most people think they are working to only pay back the amount of money they borrowed. But when you add up the total amount you’ll pay over 30 years, the result can often be more than double the amount you originally borrowed.
Here’s an example:
Mortgage Amount = $300,000
Interest rate = 7.86%
Loan term = 30 years
Minimum monthly repayment = $2,172.09
So if you only ever pay the minimum and don’t put any extra towards paying off your home loan sooner, the total amount you’ll give to your bank is as follows:
$2,172.09 x 360 = $781,952.40
When you consider that you borrowed $300,000 at the start of your home loan, by the end of that term you’ll end up paying more than one and a half times what you originally thought you had applied for. That’s a total of $481,952.40 in just interest!
Try entering a larger monthly payment figure into the mortgage calculator you’re using and see if you can reduce the amount of interest you end up paying.
Fortnightly Payments
If you’ve chosen to repay your mortgage fortnightly instead of monthly, you won’t need a mortgage calculator to work out your payment. Simply take the minimum payment shown on your mortgage documents and divide this figure in half.
Don’t do anything tricky, or try to work out how many fortnights will add up to your monthly amount. Just divide your payment in half and pay that new amount on the same day every fortnight.
Unfortunately most home loan calculators work on monthly figures only. So to work out accurately how much paying fortnightly will save you, use the following calculation:
Minimum Monthly Payment divided by 2 = fortnightly payment
Fortnightly payment multiplied by 26 = annual payment
Annual payment divided by 12 = monthly payment amount to enter into a home loan calculator.
When you enter this new figure into a mortgage calculator, it will figure that you’re voluntarily paying extra off your mortgage each month. The result you see should show you that you’ll reduce the term of your home loan by around 6 years.
However, you’ll also see that you’ll be saving yourself tens of thousands of dollars worth of interest as well.
Here’s an example using the figures from the example above:
Mortgage Amount = $300,000
Interest rate = 7.86%
Loan term = 30 years
Minimum monthly repayment = $2,172.09
Payment divided by 2 = $1,086.05
$1,086.05 x 26 / 12 = $2,353.10
(Amount of extra payment = $181.01, beginning at month one)
Some mortgage calculators ask you to input the minimum monthly payment and then add on the extra payment you intend to make. This is why we’ve worked out the numbers this way.If you enter this new figure into a home loan calculator, you’ll see that your new loan term is now 23.1 years instead of 30 years and the total amount of interest paid has dropped down to $349,576.44.
When you compare these figures to the calculations from earlier in this article, you’ll see you’ve cut your mortgage by almost 7 years.
But more importantly, you will have saved $132,375.96 in interest payments over that same term.
Principal and Interest Payments
A standard mortgage payment is comprised of two portions: a principal component and an interest component. When you sit down and work out your home loan calculations using an online mortgage calculator, you get to see the end result. This is the minimum monthly payment due for the rate of interest your loan is charged at.
What you might not realise is that the payment amount you see will be paying an amount to cover the interest that could be charged as well as an amount that will pay down your principal balance a little.
This is known as amortisation. When banks make those calculations, they factor in a principal repayment in each payment you make that will ensure it takes you until precisely the end of the mortgage term to pay off what you owe.
If you’re handy with algebra, the calculation for working out your monthly payment is as follows:
M = A * ( R – 1 ) / ( 1 – R-N )
- M = monthly repayment
- A = Initial amount of the loan
- R = (1+i/12)
- i = interest rate per month
- n = number of months
Of course, this kind of calculation is made much easier by using a simple online mortgage calculator that can work all these things out for you.
Interest Only Payments
Not all loans are charged using principal and interest repayments. Some mortgage owners prefer to pay interest only on their loans and not repay the principal. Usually investors will choose to pay interest only on a mortgage. However, there are some types of mortgages that are charged interest only on the balance owed each month, such as lines of credit.
Working out the home loan calculations for interest only payments is quite simple and can be done easily on a regular calculator:
30 Day month:
Amount Owing x interest rate per annum% divided by 365 x 30 = interest due
31 day month:
Amount Owing x interest rate per annum% divided by 365 x 31 = interest due
Using Home Loan Calculations to Pay Off Your Mortgage Faster
Paying the bare minimum monthly payment due will mean it will take you the full amount of time you signed on your mortgage contract, whether this is 25 years or 30 years.
However, if you work out the home loan calculations to pay even a little more than the minimum payment due, you could cut your loan term down by several years and save yourself thousands of dollars in interest payments.
The same is true with working out fortnightly payments for your mortgage payments. Some people try hard to work out how many fortnights are in a year and then divide their monthly payment accordingly. This doesn’t give you the effect you want of paying off your mortgage faster.
Related Resources
- Mortgage Repayment Calculator
calculator than just working out your minimum monthly payments. In fact, if you spend a bit of time playing with your own mortgage figures, you could find a good calculator can save you tens of thousands of dollars
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