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A home will likely be one of the biggest purchases you’ll ever make – but that being said, the average Australian probably won’t buy their property upfront. Most of us will need a home loan in order to buy a house or refinance, and with a home loan comes home loan repayments.

Depending on the size and type of your home loan, your repayments could potentially cost you thousands of dollars a month; this makes it crucial to have a good idea of their size before you sign on the dotted line.

This is where our mortgage repayment calculator can come in handy. If you’re in the market for a home, our calculator can help you ballpark the size of your regular repayments, and subsequently get a better idea of the impact they could have on your lifestyle and budget.

What is a mortgage repayment calculator?

Calculating home loan repayments by yourself, the old-fashioned way, can be done, but it’s boring, painstaking work. Our online mortgage calculator can do it for you in seconds.

Once you’ve plugged in your desired loan amount, interest rate, loan term, estimated fees and your preferred repayment type and frequency, our mortgage repayment calculator will show you an estimate of:

  • The size of your weekly, fortnightly or monthly minimum principal and interest repayments. For variable rate home loans, this will be a minimum repayment amount, meaning you can choose to make a larger repayment if you wish. This may or may not be an option if you have a fixed rate home loan, as some will have restrictions or limits on extra repayments.
  • The total interest and fees you’ll pay over the life of the loan. While you won’t be able to account for interest rate fluctuations, which you’ll likely experience if you have a variable rate home loan, you may still find it helpful to have a rough idea of how much you’ll pay in interest and fees all up. Two of the fees you’ll commonly encounter on a home loan include establishment fees and package fees, however your fees payable will depend on the home loan you take out.
  • The sum total of the repayments you’ll make over the life of your home loan. This figure will likely be significantly larger than your nominated loan size due to interest and fees. You may even find you’d pay more in interest than in principal repayments over your loan term, depending on the loan’s size and interest rate.

While these figures will be estimations and not a perfect representation of what your home loan repayments will look like, they could give you a good idea of the space you’ll need in your budget to sustain a home loan.

It’s important to keep in mind that this figure is an estimate only, as the size of the repayments on a variable rate home loan will fluctuate over its life (based on interest rate changes), making it near-impossible to know with certainty how much it could cost you overall.

Why you should calculate your mortgage repayments

Understanding the potential impact of your home loan repayments is crucial to knowing whether or not a home loan is something you can afford right now.

It can also help you determine an appropriate property value and home loan size that suits your financial situation and priorities. With the help of a mortgage repayment calculator, you may realise that a smaller home loan is necessary, or that you can actually afford a larger home loan than you previously thought.

Whether you’re a first home buyer, refinancing or looking for an investment property, knowledge is power, and knowing what you can afford before you get the ball rolling will likely help you make smarter and better-informed financial decisions.

Tips for calculating your mortgage repayments

If you know what you’re looking for in a home loan and have a good idea of your budget, calculating your home loan repayments can be as simple as plugging in the right numbers.

That being said though, there are a few tips, tricks and pitfalls to be aware of that could help you walk away with a stronger and more realistic idea of what your borrowing power looks like.

1. Factor in a higher interest rate

When looking at your borrowing power in the context of a home loan application, banks will typically use a home loan interest rate up to 3% higher than the actual rate. Put simply, this is to make sure you could still afford your home loan repayments and interest charges if interest rates were to change dramatically. So, when calculating your home loan repayments, you may want to check your desired home loan size against:

  • An interest rate on par with the current market average
  • An interest rate that’s 3% or so higher than the current market average.

This will help you figure out if you can ‘truly’ afford a home loan of that size and afford continuing to service it in the event of significant interest rate changes.

2. Choose a longer loan term

Depending on your financial needs and priorities, you may have opted for a smaller loan term, say 15 or 20 years. However, you may want to experiment with longer loan terms of up to 30 years, as this will typically leave you with smaller repayments stretched over a longer period of time. While you won’t necessarily service the home loan for the full 30 years, opting for a longer term can make budgeting and managing your cash flow slightly easier.

3. Fiddle around with your repayment frequency

You may also want to explore the merits and sizes of various different repayment frequencies. While the long-term differences won’t be huge, you may want to find out whether more or less frequent repayments will better suit your budget and cash flow preferences, and if you may even save a small amount in the long run.

How to reduce your home loan repayments

If your end goal is the smallest regular repayments possible, there are a few variables you can tweak and a few strategies you can adopt that could see your regular repayments shrink somewhat in size, either from the get-go or over the long term.

Make extra repayments

As mentioned, our loan repayment calculator will show you, based on the parameters you input, the minimum required repayments on your hypothetical home loan. However, if you have a variable rate home loan (or a fixed rate that allows additional repayments), making extra repayments towards your home loan could shrink your repayments over time.

This is because paying down your principal at an accelerated rate will generally reduce your total interest payable over the life of the loan, which in turn means your home loan will potentially cost you less overall.

This tip also applies to making lump sum repayments – if your loan allows them, even a modest lump sum could make a big dent!

Change your repayment frequency

Shifting to a more frequent repayment frequency won’t make your regular repayments cheaper, but it will make them smaller. So, while two weekly repayments will generally add up to just about the same as one fortnightly repayment, you may find that a smaller, more frequent repayment is easier to manage, or is better-suited to your financial situation.

That being said, making more regular repayments can help you pay off your home loan quicker.

Use an offset account

A mortgage offset account is a type of transaction account which is linked to your home loan. The balance of this account is then offset against your home loan balance, meaning interest is charged on a smaller overall figure. This reduces your interest repayments, and subsequently the overall size of your home loan repayments.

For example, if you had $400,000 outstanding on your home loan and $50,000 in your offset account, you would only be charged interest on $350,000 of that loan amount.

Compare the Market can help you with your calculations

If you’re keen to get the ball rolling and start exploring your home loan options, we’re here to help. So, no matter where you are in your home buying journey, compare your options with Compare the Market.

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