Mortgage Repayment Calculator
A good home loan repayment calculator can be an invaluable tool for anyone with a mortgage. If your lender raises or lowers your interest rates, using a mortgage calculator can be a good way to check what your new monthly repayments will be.
Featured Mortgage Home Loan
State Custodians Standard Variable Offset Loan offers no application fees, unlimited free redraw and 100% free interest offsetting. Awarded the 2011 Non bank Lender of the Year
- Interest Rate of 6.02%
- Comparison Rate of 6.23%
- Application Fee of $0
- Maximum LVR With LMI: 95%
- Minimum Borrowing: $150,000
- Maximum Borrowing: $1,000,000
But you can also use a home loan repayment calculator to help you work out a mortgage reduction strategy that should see you pay off your loan much sooner.
Using a Home Loan Repayment Calculator
Most standard calculators ask you to input the amount you borrowed, the interest rate you’re paying and the term of your mortgage. The result usually gives you the minimum monthly payment you’re expected to pay to your lender.
However, there are some more advanced calculators around that can show you far more detail. You need to look for one of these if you intend to use it for debt reduction purposes.
These are the calculators that also show you the total amount of interest you’ll pay over the term of the loan. They should also ask you if you’re going to pay any extra on top of your regular payment each month. This is so the calculator can work out how much time you’ll cut off the end of your home loan and how much interest you’ll save by making that extra contribution.
Paying Your Mortgage Fortnightly
Most Australians are paid fortnightly, so it makes sense to try and pay your mortgage when you get paid. This makes it easier for you to budget, but it also makes it much easier for you to repay your home loan faster.
The calculation for figuring out how much your fortnightly mortgage payment should be is really simple:
Take your current monthly payment and divide it by 2.
If you had to work any harder than this to find out your fortnightly payment, you’re doing it wrong. Just cut the normal amount you pay in half.
So even though this is the payment amount you’ll make every fortnight, it isn’t the number you enter into a home loan repayment calculator to figure out how much good it’s doing you.
Most mortgage calculators work using monthly payments only. For this reason, you have to determine accurately how much extra those simple fortnightly payments really add up to.
Here’s how it works:
Minimum monthly payment divided by two = fortnightly payment
Fortnightly payment multiplied by 26 = annual payment
New Annual payment divided by 12 = actual monthly payment
Actual monthly payment minus real minimum monthly payment = amount extra you’re paying.
That looks a little complicated, so let’s translate it over to a real example with real numbers:
Loan Amount: $250,000
Interest Rate: 7.16%
Loan Term: 30 years
Minimum payment: $1,690.21
If you paid the exact minimum monthly amount every month for 30 years, or 360 months, you would end up paying a total of $358.475.60 in just interest costs to your bank. That’s almost one and a half times more money in just interest charges than the amount you originally borrowed.
The calculation for this is really easy. Take your monthly payment and multiply this by 360 months.
$1,690.21 x 360 = $608,475.60
You end up paying more than $600,000 to your bank on a $250,000 loan if you continue to pay just the minimum payment each month.
However, let’s continue the calculation and see what it could do for your mortgage.
Fortnightly payment = $1,690.21 / 2 = $845.11
Real monthly payment = $845.11 x 26 / 12 = $1,831.07
Extra contribution each month = $1,831.07 – $1,690.21 = $140.86
If you enter these new figures into a home loan repayment calculator and include that you’re making an extra contribution of $140.86 each month, the results will show you that you’ll pay off your mortgage in 23 years and 8 months. That’s a full 6 years and 4 months off the original loan term.
What’s more exciting though is that this simple calculation and changing your payment frequency could reduce the amount of interest you pay down to $268,720.36
In this particular example, the home loan repayment calculator shows us that paying your mortgage fortnightly can save you $89,755.24 in interest.
Ask A Question