Mortgage Calculator Australia
Work out your home loan repayments, then see how extra repayments, an offset account, or a lump sum cut your interest and pay the loan off years sooner.
How Mortgage Repayments Are Calculated
Australian home loans typically use the principal and interest (P&I) amortisation formula to calculate repayments. The formula ensures each payment covers the interest charged for that period plus a portion of the loan principal, so the loan is fully repaid by the end of the term.
P&I Monthly Repayment Formula
M = P x [r(1 + r)^n] / [(1 + r)^n - 1]
- M = monthly repayment
- P = loan principal (amount borrowed)
- r = monthly interest rate (annual rate / 12)
- n = total number of monthly payments (loan term in years x 12)
In the early years of a loan, the majority of each repayment goes toward interest. As the principal decreases over time, a larger share of each payment reduces the balance. This is why extra repayments early in the loan term have such a powerful compounding effect.
Current Average Rates by Lender Type
Mortgage rates in Australia vary depending on the lender type, loan-to-value ratio (LVR), and whether you choose a fixed or variable rate. The table below shows indicative average rates as of early 2026 for owner-occupier P&I loans with an LVR of 80% or below.
| Lender Type | Variable Rate | 2-Year Fixed | Features |
|---|---|---|---|
| Major Bank | 6.10% - 6.40% | 5.80% - 6.20% | Offset, redraw, branches |
| Online Lender | 5.70% - 6.10% | 5.50% - 5.90% | Lower fees, limited branches |
| Credit Union | 5.90% - 6.30% | 5.60% - 6.10% | Member-owned, competitive fees |
| Non-Bank Lender | 5.80% - 6.20% | 5.60% - 6.00% | Competitive rates, flexible criteria |
Rates are indicative and change frequently. Always check directly with lenders for current pricing. Comparison rates, which include most fees and charges, may be higher than advertised headline rates.
Worked Examples: Monthly P&I Repayments
The table below shows estimated monthly principal and interest repayments for common loan amounts over a 30-year term at three different interest rates.
| Loan Amount | @ 5.5% | @ 6.0% | @ 6.5% |
|---|---|---|---|
| $400,000 | $2,271 | $2,398 | $2,528 |
| $600,000 | $3,407 | $3,597 | $3,793 |
| $800,000 | $4,543 | $4,796 | $5,057 |
| $1,000,000 | $5,679 | $5,996 | $6,321 |
Based on a 30-year loan term with monthly P&I repayments. Does not include fees, insurance, or other charges.
P&I vs Interest-Only Repayments
Interest-only (IO) loans are popular with property investors because the lower initial repayments improve short-term cash flow. However, they cost significantly more over the life of the loan. Here is a side-by-side comparison for a $600,000 loan at 6.0%.
| Metric | P&I (30 years) | IO 5 years, then P&I 25 years |
|---|---|---|
| Monthly repayment (initial) | $3,597 | $3,000 |
| Monthly repayment (after IO period) | $3,597 | $3,866 |
| Total interest paid | $695,000 | $740,000 |
| Extra interest cost | - | +$45,000 |
The IO option saves around $597/month during the initial 5-year period, but the loan balance stays at $600,000 the whole time. Once the IO period ends, repayments jump to about $3,866/month (higher than the P&I option) because you now repay the full principal over only 25 years. The result is roughly $45,000 more interest over the life of the loan.
Impact of Extra Repayments
Making even modest extra repayments can dramatically reduce your total interest and loan term. Extra repayments go directly toward reducing the principal, which means less interest is charged in every subsequent period.
Worked Example: $200/month Extra on a $600,000 Loan
Loan: $600,000 at 6.0% over 30 years. Minimum monthly repayment: $3,597.
| Scenario | Monthly Payment | Loan Term | Total Interest |
|---|---|---|---|
| Minimum repayments only | $3,597 | 30 years | $695,000 |
| + $200/month extra | $3,797 | 26 years 1 month | $588,000 |
| + $500/month extra | $4,097 | 22 years 1 month | $482,000 |
$200/month extra saves
~$107,000 in interest & about 3 years 11 months off the loan
$500/month extra saves
~$213,000 in interest & about 7 years 11 months off the loan
Tips for Reducing Your Mortgage Repayments
- 1.Negotiate your rate. Even 0.25% lower on a $600,000 loan saves over $30,000 in total interest. Call your lender annually and ask for a rate review, especially if competitors are offering better deals.
- 2.Use an offset account. Money in a 100% offset account reduces the balance on which interest is calculated. Keeping $50,000 in offset on a $600,000 loan at 6.0% saves approximately $3,000 in the first year alone, and far more over the life of the loan.
- 3.Switch to fortnightly repayments. Paying half your monthly repayment every two weeks results in 26 half-payments (13 full payments) per year instead of 12, knocking years off your loan.
- 4.Refinance when it makes sense. If your loan is more than 2-3 years old and rates have moved, refinancing to a lower rate could save thousands. Factor in any break costs, discharge fees, and application fees when comparing.
- 5.Avoid unnecessary features. Not everyone needs a package deal with a credit card and insurance. A basic no-frills variable loan often has the lowest rate and fewest ongoing fees.
Analyse Your Property Purchase
Realestate Lens helps you understand the full financial picture when buying property, including mortgage costs, stamp duty, legal fees, and hidden risks in the contract.
Try Free, 1 Analysis IncludedFrequently Asked Questions
With P&I repayments, each payment reduces both the loan balance and the interest charged. With interest-only repayments, you only pay the interest for a set period (typically 1-5 years), so the loan balance does not decrease. IO repayments are lower in the short term but cost significantly more over the life of the loan because you are not reducing the principal.
Variable rates can change at any time, though they are most commonly adjusted after the Reserve Bank of Australia (RBA) changes the official cash rate at its monthly board meetings. Fixed rates are set for the duration of the fixed term (1-5 years) and do not change regardless of RBA decisions.
It depends on your risk tolerance and market outlook. Fixed rates offer certainty and protection against rate rises, but you may miss out if rates fall. Variable rates are more flexible (allowing extra repayments and offset accounts) but can increase unexpectedly. Many borrowers split their loan with a portion fixed and a portion variable.
Extra repayments can save you tens of thousands of dollars in interest and shave years off your loan. For example, paying an extra $200 per month on a $600,000 loan at 6.0% over 30 years saves approximately $107,000 in interest and pays the loan off about 3 years and 11 months early. The earlier you start making extra repayments, the greater the benefit, because the interest saving compounds over the remaining term. Use the calculator above to model your own loan.
A 100% offset account is a transaction account linked to your home loan. The balance in it is subtracted from your loan balance before interest is calculated, so you only pay interest on the difference. For example, $50,000 in offset on a $600,000 loan at 6.0% saves roughly $3,000 in interest in the first year, and far more over the life of the loan because the saving compounds and shortens the term. Unlike extra repayments, offset money stays accessible.
Common mortgage fees include application or establishment fees ($0-$600), monthly or annual account-keeping fees ($0-$400/year), rate lock fees (for fixed rates), break costs (for exiting a fixed rate early), discharge fees ($150-$400), and lenders mortgage insurance (LMI) if your deposit is less than 20%. Always compare the comparison rate, which includes most fees, rather than just the headline rate.