Calculators guide
How to Calculate Mortgage Repayments (and Pay Your Loan Off Faster)
Updated 27 September 2026 · 3 min read
A home loan is the biggest financial commitment most people ever make, yet few borrowers know how their repayment is worked out. Understanding the numbers helps you compare lenders, choose a loan term and see how much extra repayments really save.
Open the free Mortgage CalculatorThe mortgage repayment formula
For a standard principal-and-interest loan with a fixed rate, the regular repayment is:
M = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)
- M = repayment each period
- P = amount borrowed (the principal)
- r = interest rate per period (annual rate ÷ 12 for monthly repayments)
- n = total number of repayments (years × 12 for monthly)
You don’t need to do this by hand — the Mortgage Calculator does it instantly and shows the full repayment schedule.
Worked example
Borrowing $500,000 at 6% a year over 30 years, with monthly repayments: r = 0.06 ÷ 12 = 0.005 and n = 360. The repayment is about $2,998 a month. Over the life of the loan you repay about $1.08 million — roughly $579,000 of it interest.
25 years vs. 30 years
| Loan term | Monthly repayment | Total interest |
|---|---|---|
| 30 years | ≈ $2,998 | ≈ $579,000 |
| 25 years | ≈ $3,222 | ≈ $466,000 |
Paying about $224 more a month saves around $113,000 in interest and five years of repayments (same $500,000 loan at 6%).
How interest rates change the picture
On the same $500,000 30-year loan, a rise from 6% to 6.5% lifts the repayment from about $2,998 to about $3,160 a month. Before you borrow, test your budget at a rate 2–3 percentage points higher than today’s — lenders do something similar when they assess you.
Three ways to pay your loan off faster
1. Make extra repayments
Every extra dollar goes straight to the principal, so it saves interest for the rest of the loan. Even small regular extras make a large difference over decades. Check whether your loan allows extra repayments — some fixed-rate loans cap them.
2. Pay fortnightly instead of monthly
Paying half your monthly repayment every fortnight means 26 half-payments a year — the same as 13 monthly payments instead of 12. In the example above, that could cut roughly five years off a 30-year loan, depending on how your lender calculates interest.
3. Use an offset account
Money in an offset account reduces the balance you pay interest on while staying available to you. Savings of $20,000 in an offset account against a 6% loan save around $1,200 of interest a year.
Costs the repayment doesn’t show
- Upfront costs such as stamp duty or transfer duty, legal fees and lender fees.
- Lenders mortgage insurance if your deposit is below about 20%.
- Ongoing account fees, council rates, insurance and maintenance.
To work out what you can comfortably borrow, try the Mortgage Affordability Calculator.
A note on accuracy
These calculations are estimates for a fixed rate. Variable rates change over time, and lenders may calculate interest daily. For decisions about your own loan, speak to your lender or a licensed adviser.