Each repayment covers that period’s interest, and the rest reduces the loan. Early on most of the repayment is interest; by the end most of it is principal. The calculator finds the level repayment that brings the balance to exactly zero at the end of the term.
Extra repayments go straight to principal, so every later repayment has less interest in it and the loan finishes early. Many variable loans allow unlimited extra repayments; fixed loans often cap them, so check with your lender.
What are the repayments on a $600,000 mortgage?
At 6% over 30 years, about $3,597.30 a month on principal and interest, or $3,000.00 a month interest-only. Over the full term you'd pay around $695,029 in interest on principal and interest.
How much do extra repayments save?
On that same $600,000 loan, an extra $500 a month pays it off in about 22.1 years instead of 30 and saves roughly $212,713 in interest. Extra money early in the loan saves the most, because it stops interest compounding on that amount for longer.
Is it better to pay fortnightly or monthly?
Paying the same annual amount fortnightly instead of monthly makes little difference on its own. The saving people talk about comes from paying half the monthly repayment every fortnight: there are 26 fortnights in a year, so you end up making the equivalent of 13 monthly repayments instead of 12. Try it by entering the extra amount.
What is the difference between principal and interest and interest-only?
Principal and interest repayments cover the interest and pay down the loan, so the balance reaches zero by the end of the term. Interest-only repayments are lower but don't reduce the balance, so you still owe the full amount when the interest-only period ends, usually after 1 to 5 years.
Does an offset account reduce my repayments?
Not usually. Your scheduled repayment stays the same, but interest is charged only on the loan balance minus your offset balance, so more of each repayment goes to principal and the loan finishes sooner.