There are a number of different reasons why you might be considering refinancing your mortgage. Your financial situation may have changed since you first took out your home loan, or you might be wondering whether your interest rate is still competitive.
Even if you’re happy with the price of your regular repayments, it might be worth using a refinance calculator to find out the potential benefits of switching your mortgage, including the savings you could make.
What is a home loan calculator?
A home loan calculator is a tool that can help you understand the cost of your current or potential mortgage repayments. Also called a mortgage repayment calculator, by using this calculator you’ll be able to:
- Identify low interest rates: find an affordable interest rate and compare against loans with higher interest rates to calculate potential savings.
- Identify your loan amount: through inputting your personal income and total saved deposit, you can calculate the amount possible for you to borrow and comfortably repay.
- Identify interest total repayments: clarify what exactly you’ll have to pay back in total over the lifetime of your loan by breaking down interest repayments based on your loan term.
What is a repayment?
A repayment is an amount of money that you pay back to the institution that you took a home loan from. Usually paid on a monthly basis, loans may consist only of interest repayments only or require principal and interest repayments.
Your specific home loan contract will detail repayment due dates and minimum amounts required.
How can a repayment calculator help?
Taking out a home loan may be one of the most expensive financial decisions you can make over your lifetime. Buying a home is an important dream for many Australians and loan repayments may equate to a high percentage of your cost of living. Therefore, understanding the finer details of repayments are crucial to your and your family’s financial security.
The main benefit of the home loan calculator is to find out the mortgage amount you can take out and see what repayments will be so you have defined parameters on the type of property you can realistically purchase. This will shape your final decision you make when committing to a home loan. Whether you intend to use it to find a new loan that suits your situation best or as a comparison tool when looking to refinance your loan to get a better deal.
By adjusting different variables on the calculator, such as interest rates, loan terms and payment frequencies, it can help you understand how these factors impact your loan long term and what potential benefit they may have in paying off your home loan sooner.
When should I use a home loan calculator?
Using a home loan calculator is advisable at all stages of your home loan lifecycle, such as:
- Before you look at properties to buy: get an estimation of what a loan amount a mortgage lender may offer you and understand the reality of your real estate budget.
- After you research the property market: to define boundaries around the property you could potentially afford based on the amount of loan you may possibly be lent.
- For home loan pre-approval: grasp what repayments you could afford and how this could change based on fluctuating interest rates.
- When making a purchase offer: to help determine how property values and real estate prices can impact your home loans LVR and LMI.
- For comparison when refinancing: through identifying more suitable interest rates that may mean that you make less repayments over the life of the loan, bettering your financial situation.
Things you should know
Home loan repayments are determined by many external variables that cannot be completely covered by the home loan calculator. Information provided by the calculator is a best estimate only based on the input details provided and does not include added information that can alter payments such as fees and charges or variable rates. Interest rates are subject to change and this will affect the repayments made over the course of your loan.
A home loan calculator does not substitute professional financial advice, prescribed to your unique situation, but it will help give you a clearer picture when identifying home loan suitability. To get the most accurate picture of your home loan, get in touch.
If you need help calculating your stamp duty, split fixed variable and fixed interest loan repayments, loan comparison, home loan offset and other associated costs, we have other calculators that can assist.
What costs are included in the home loan repayment?
Prior to using the home loan calculator, it’s helpful to have an understanding of the below three key areas. Where exact figures aren’t known, use your best estimate:
- Amount you plan to borrow: known as your total or principal loan amount
- Interest rate: use a default or advertised interest rate
- Length of loan term: choice of how many years your loan will take to repay
For example, if the current real estate market dictates that the property you’d like to purchase is $750,000 and you have a 20% deposit of $150,000 as a down payment, then the principal amount needed as a home loan is $600,000. That home loan amount combined with an interest rate of 4.25% over 30 years, equates to a required monthly repayment of $2,951.64 based on our home loan calculator.
How do I use this repayment calculator?
To estimate your mortgage repayments based on the type of home loan you have or are considering, input the following information our home loan repayment calculator:
- Total or principle loan amount
- Specific interest rate
- Loan term or total years of the life of your loan
- Repayment fee and frequency, e.g. weekly, fortnightly, monthly, annually
Play with the result you get at first calculation by modifying areas such as loan term and repayment frequency to determine whether there are any areas which could be adjusted to help you save more money over the course of your loan.
What costs are included in the home loan repayment?
The total cost of your home loan repayment usually consists of the principal amount, interest on the loan and any additional fees. Based on your own personal circumstances, this also may include LMI if you were not able to make a 20% down payment when obtaining your home loan.
Can my monthly loan repayment amount increase?
External factors can affect the interest rate paid on your home loan. If your home loan is on a variable interest rate and it increases over your loan period, you should expect to make higher repayments. Payments will also vary based on the home loan repayments types. Keep reading below to understand the different types.
What are the different home loan repayment options?
How you choose to make repayments is dependent on what is right for you. The pros and cons are worth calculating to understand what repayment option you choose to make now and how that affects the future cost of your home loan.
Principal and interest
The total amount borrowed for a home loan is referred to as the principal. Starting out as a fixed amount and decreasing with each repayment, the principal must be repaid over the life of the loan.
- Default method of home loan repayment
- Each repayment comprises of a percentage of the principal + interest + fees
- Interest rates are lower than interest only repayments
- Monthly repayments will be higher than interest only repayments
- Each principal repayment moves you further towards owning your home outright
Interest-only repayments
This type of loan repayment offers flexibility as it will lower your repayment amounts temporarily. This may benefit your financial situation, lifestyle or in the case your home loan is for an investment property, you could claim higher tax deductions for an interim if you opt to make interest only repayments.
- Each repayment comprises of interest + fees only
- Interest is charged at a higher rate than principal and interest loans, as essentially the principal will have to be repaid in a shorter period of time
- Total amount of interest paid over the life of the loan will be higher
- Only available for an agreed time period, then reverts back to principal and interest repayments
- Equity will build slower, which could be a disadvantage if the value of your home does not increase if you choose to sell
Tips to pay off your home loan faster
The freedom of being mortgage free is the goal behind paying off your home loan faster. It may grant you a more secure financial future and offer greater flexibility in what you choose to spend your money on. Speak to your lender to understand what is right for you.
1. Increase your repayments
Making extra payments will chip away at the outstanding principal amount and decrease interest charged in the long run. Cross check with your lender prior to making any changes as there may be limits.
2. Raise your repayment frequency
Paying your loan off weekly or fortnightly increases the number of payments you make each year, affecting the rate of future interest as the principal amount decreases.
3. Compare your home loan options
Find out the options you have to refinance your home loan and make a habit to do this annually. Home loans perpetually evolve, so the potential to find something that reduces the overall payment of your loan is high.
4. Link your home loan to an offset account
Essentially an additional account joined to your home loan, a mortgage offset account primarily reduces the potential interest paid. The balance in your offset account is countered by the balance of your mortgage account, lowering the total rate of which your interest is calculated.
5. Understand fixed and variable interest rates
Do your research to identify which type of interest rate can work for you. Fixed rates are usually for a set period of time based on the market interest rate at the time of signing your home loan. Variable interest rates are generally more flexible and allow you to make extra repayments but they can fluctuate and increase due to external factors. There’s also an option of combining fixed and variable rates to certain portions of your loan.
6. Create healthy financial habits
Short term sacrifices can lead to long term gains. Identify where your money is going and create a budget that realistically increases the amount you can save. Make a rule to add those savings and any additional windfalls like a salary bonus or tax return to your outstanding mortgage. Only use redraws on your home loan as a last resort.
Paying your mortgage weekly vs monthly
Most people understand that the regularity of their repayments can help reduce the interest paid over time. However, it can be hard to picture just how much money you can save by making your repayments more frequent.
Looking at repayment frequency at the most basic level, the fact that there are 26 fortnights or 52 weeks in a calendar year in comparison to 12 months means that opting for the weekly or fortnightly option will result in an extra month’s worth of payments, reducing the duration of the mortgage overall.
This may not seem like much, but let’s take a look at the following scenario…
You take out a 750,000 Star Classic Loan at a LVR of 70% which has a rate of 5.99% over 30 years. Your total interest when making monthly repayments would be approximated $ 867,051. However, let’s say you decided to pay fortnightly instead. Your interest would now come down to $ 681,606. Similarly, if you choose to make repayments weekly, the interest would drop down even further to $ 680,783. As an added bonus, paying weekly would also shorten your loan term by 5 years 6 Months, or fortnightly by 5 years 6 Months.
|
$750,000 Star Classic Loan at 5.99% (30 years) |
Monthly |
Fortnightly |
Weekly |
|---|---|---|---|
| Repayments | $ 4,491.81 | $ 2,245.90 | $ 1,122.95 |
| Interest Payable over Loan Term | $ 867,051 | $ 681,606 | $ 680,783 |
| Time Saved | ✘ | 5 years 6 Months | 5 years 6 Months |
| Interest Saved | ✘ | $ 188,445 | $ 186,268 |
| Total Cost of Loan (Principal + Interest) | $ 1,617,051.00 | $ 1,431,606.00 | $ 1,430,783.00 |
Through this given example, you can clearly see that opting for more frequent payments can make a huge dent in the total interest and duration of your home loan. Although weekly payments can seem like more of a commitment or chore, in the long run it can save you a lot of time and money.
Get more than a better deal with Homestar Finance.
For great rates, great savings and great service, Homestar Finance has you covered. Fill in your details to connect with a dedicated lending specialist.
Frequently Asked Questions
How much of a deposit do I need for a home loan?
The minimum required deposit is 10%, but 20% is usually preferred. If you pay a deposit that is less than 20%, you’ll have to take out lenders mortgage insurance (LMI); which is a premium that gets added on to your home loan. You may be required to pay LMI when you refinance.
Does Homestar Finance offer the first home loan deposit scheme?
The First Home Loan Deposit Scheme is a form of government assistance that allows first home buyers to save on deposits and LMI. Find out more information here.
What is the difference between refinancing and switching home loans?
Refinancing is often referred to as switching home loans, and the two terms are often used interchangeably.
Our disclaimers
1 Rates shown apply to new eligible Owner Occupieda or Investment home loansb only, loan limits may apply depending on your product (refer to the product page) and at least one applicant is on PAYG employment. For fixed rate loans, after the fixed rate term, a variable rate will apply. Rates are subject to change without notice. Existing borrowers may have different interest rates which are dependent on the rate offered to the borrower at the date when a home loan settled and any reductions or increases the lender decided to make on the existing loan over time. Accordingly, there is not one standard variable rate that applies to all Homestar home loans and existing customers can confirm their current rate(s) by logging in to internet banking or by contacting customer service. Terms, conditions, and eligibility criteria apply.
2 Comparison rates are based on a basic Homestar loan, on a $150,000 loan amount over 25 years. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.
3 Third party cost(s) incurred by service provider(s) are payable and may vary or increase depending on the service provider, nature of the service and request. Any additional cost(s) are passed on directly to the applicants(s). If there is a variation or an increase, a separate quote will be provided..
4 Disbursements may also be payable.
Other fees and charges may apply.
DISCLAIMER: Terms, conditions and eligibility criteria apply to all our loan products and features. Fees, charges and disbursements are payable. Final approval is subject to credit assessment. Information valid as at [cgv product-page-disclaimer] which is subject to change without notice. Please consider if the product is appropriate for your individual circumstances. If you need assistance or have any questions about a product or feature and its suitability, please contact our Loan Specialists.
Ⓡ Registered to BPAY Pty Ltd ABN 69 079 137 518
