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How to use a home loan calculator

A home loan calculator can help you to:

  • Find a low rate: Work out the lowest interest rates you can afford, and how much you could save compared to a higher rate loan. 
  • Find out how much you can borrow: Use your income and saved deposit to work out how much you can afford to borrow and comfortably repay.
  • Find out how much you’ll pay in interest: Break down the total cost of your loan, and see how much total interest you’ll pay when you buy a property.

Keep in mind that a mortgage calculator does not take every aspect of your personal situation into account, and is not a substitute for professional financial advice.

Why you should use a mortgage repayments calculator on RateCity

Using a mortgage calculator at a comparison site such as RateCity may help you estimate the costs and benefits of a wider variety of loan choices, and gain a deeper understanding of how a new home loan’s features can affect its overall value. 

Mortgage calculators, such as those found on RateCity, can help you quickly and easily compare the costs and benefits of home loans from a variety of different mortgage lenders – simply enter the details of each offer to estimate its overall value. 

Using a bank’s home loan calculator, such as those from the Commonwealth Bank, ANZ or another major lender, may help you estimate the cost of repayments for its own mortgage products, which can be handy if you’re looking at a specific home loan from a specific bank or lender. 

However, bank mortgage calculators may not always let you adjust the figures in your calculation (e.g. the interest rate, loan term etc.), preventing you from being able to see how each may affect the loan. Plus, there may not be an easy way to compare the calculated cost of the bank’s mortgage offers to the value of home loans from other mortgage lenders. 

On the other hand, a mortgage calculator from a home loan comparison site may allow you to enter your own interest rate, loan term and more, giving you more control over your calculations, and a greater understanding of the loans you can apply for. This can help give you a better idea of which home loan features and benefits may affect each home loan’s final cost and value.

What type of home loan calculator should I use when I’m looking to buy?

Much like home loans, mortgage calculators aren’t one-size-fits-all, and there are many options to choose from. 

If you’re starting out, you may want to use a borrowing power calculator, which will help you determine how much money you can expect to take out ahead of pre-approval. You can use this number to gauge how much you think you can afford, and apply that as you search for a home. 

A broker may be able to help maximise your borrowing power, but this is a solid first step to working out what you can spend. 

If you’re closer to buying, a Lender’s Mortgage Insurance calculator will help provide a gauge on how much LMI you might be up for on a property, while a Stamp Duty Calculator assists in understanding any stamp duty you may have to pay on a property.

After this, consider the calculator on this page, the standard Home Loan Calculator, which provides a more firm understanding of what you can expect to pay for a new home. Home loan calculators, such as RateCity’s mortgage calculator, provide a way of working out which loans match your needs and financial situation, ordered by variables that matter most to you. 

What other costs should I consider? Are there upfront costs?

While a home loan calculator can assist with answers on mortgage costs, there are many factors that can affect the cost of your home loan, as well as other expenses associated with buying home or investment property. These include: 

  • Type of property: Are you buying a new or existing dwelling? Home loans for new off-the-plan developments may cost more, as the value of the property is not yet known.
  • Type of buyer: Are you an investor? An owner-occupier? A first home buyer? Many banks consider some types of borrowers riskier than others, and may charge higher interest rates for certain loan types. 
  • Deposit size: Is your deposit less than 20 per cent of the property value? Do you have a loan to value ratio (LVR) above 80 per cent? If so, you may have to pay lenders mortgage insurance (LMI).
  • The state or territory where you’re buying: Costs like stamp duty vary from state to state.
  • Additional costs: You may be able to add extra expenses to your home loan, such as to cover the cost of moving, renovating or refurnishing a property. However, this may mean paying more in interest. 

What if interest rates change?

While you can use a mortgage calculator to work out the cost of a home loan, these calculations are unlikely to remain accurate for your home loan’s full term. Variable interest rates may rise or fall, making your mortgage payments cost more or less. Even a fixed interest rate is only temporary, and will revert to a variable rate upon expiry. 

One way to estimate if you can afford a mortgage is to calculate the repayment amount if interest rates were to suddenly increase by two percentage points, and work out if these higher mortgage payments could still fit into your household budget.  

How much can I borrow?

Before most banks will approve a home loan application, they’ll want to be confident you can comfortably afford the loan without ending up in mortgage stress. This is when a sudden change in your circumstances, such as an interest rate increase or losing your job, could leave you struggling to afford your home loan. 

Different banks measure mortgage stress differently, One common benchmark is that if more than one third of your household income would go towards repayments on a home loan, you may be in mortgage stress. 

Before you apply for a mortgage, look at your income and expenses to work out how well you could manage the repayments. 

How does my salary affect my home loan?

The more money you take home from your job, the more you may be able to afford in mortgage repayments. The larger the repayments you can afford, the more money you may be able to borrow in your home loan.

When a lender calculates if you can afford a home loan, it will likely concentrate on income you regularly earn from your job. Other income sources, such as bonuses, overtime, or interest from investments, may not be fully included, as these are considered less regular.

If you don’t earn a regular salary from an employer, such as if you’re a freelancer, contractor, or sole trader, you may not be able to provide payslips as proof of income when you apply for a home loan. It may be worth comparing some low-doc home loan options to help improve your application’s chances of approval.  

What about extra home loan repayments?

Many home loans let you make extra repayments, to reduce your loan amount faster. This can help to reduce your interest charges, so your loan can cost less and you can get out of debt sooner. 

A home loan calculator can help you estimate how much you could save in interest charges by regularly making extra repayments on your home loan, or by paying a lump sum onto your mortgage. Sometimes even switching from monthly repayments to fortnightly repayments can make a big difference to your loan’s total cost.

Keep in mind that some lenders limit how many extra repayments you can make on a home loan, or may charge fees for making extra repayments. Be sure to check the terms and conditions, key facts sheet or product disclosure statement.

What about interest-only home loans?

Paying only the interest charges on your home loan may be appealing if you want to reduce the impact on your monthly household budget. However, while you’re making interest-only repayments, you’re not reducing the loan principal you owe. This means your loan will take longer to pay off, and may cost you more after it reverts to a principal and interest loan.  

Compare the different repayment types before making your choice. You can use a mortgage calculator to work out how much an interest-only loan may save you in the short term, or cost you in the long term, and decide if an interest-only loan may be right for you. 

What’s the next step after using a mortgage calculator?

After the mortgage repayment calculator has told you how much you could expect to pay for your home loan, the next step is to compare the range of home loans that are available on the market, and to consider their interest rates, fees, features and other benefits, such as offset and redraw. There may also be other eligibility criteria or lending criteria for you to fulfil when you’re home buying.

Keep in mind that as well as interest, there may be upfront and ongoing fees and other charges to consider. To get a better idea of a home loan’s overall cost, look at its comparison rate. A mortgage’s interest and standard fees and charges are included when calculating its comparison rate, so you can tell at a glance which loans could end up costing more or less. Just remember that home loan comparison rates are calculated using pre-set assumptions for consistency – different terms will likely apply to your loan, so the comparison rate should provide a guideline only.

Once you find a loan that may match your needs, you can contact the lender directly to make an application. If you’re having trouble working out which mortgage offer may be right for you, a mortgage broker may be able to provide personal financial advice. 

What type of home loan calculator should I use if I want to refinance?

Once you’ve been paying a mortgage for a while, and have had a chance to build up some equity in the property, it may be worth comparing your home loan options to see if you want to refinance your loan. Switching to a lender offering a lower home loan interest rate could mean paying less money from month to month, leaving more room in your household budget. 

You may want to consider using a Mortgage Stress calculator to work out whether you’re comfortable in your current home loan, and whether you can do better. If you come out in the green, you may be fine, but yellow and red suggest a high level of stress, and you may be able to consider switching home loan lenders. 

Customers looking to refinance may want to use the Home Loan Refinance Calculator, which like a mortgage calculator provides options for customers thinking of switching banks and lenders, and shows potential savings. Remember that switching home loan products to a mortgage with a longer loan term could end up costing you more in total, even if the interest rate is lower, so consider your options carefully.

What is a guarantor?

A guarantor is someone who provides a legally binding promise that they will pay off a mortgage if the principal borrower fails to do so.

Often, guarantors are parents in a solid financial position, while the principal borrower is a child in a weaker financial position who is struggling to enter the property market.

Lenders usually regard borrowers as less risky when they have a guarantor – and therefore may charge lower interest rates or even approve mortgages they would have otherwise rejected.

However, if the borrower falls behind on their repayments, the lender might chase the guarantor for payment. In some circumstances, the lender might even seize and sell the guarantor’s property to recoup their money.

How do I take out a low-deposit home loan?

If you want to take out a low-deposit home loan, it might be a good idea to consult a mortgage broker who can give you professional financial advice and organise the mortgage for you.

Another way to take out a low-deposit home loan is to do your own research with a comparison website like RateCity. Once you’ve identified your preferred mortgage, you can apply through RateCity or go direct to the lender.

What is breach of contract?

A failure to follow all or part of a contract or breaking the conditions of a contract without any legal excuse. A breach of contract can be material, minor, actual or anticipatory, depending on the severity of the breaches and their material impact.

What happens when you default on your mortgage?

A mortgage default occurs when you are 90 days or more behind on your mortgage repayments. Late repayments will often incur a late fee on top of the amount owed which will continue to gather interest along with the remaining principal amount.

If you do default on a mortgage repayment you should try and catch up in next month’s payment. If this isn’t possible, and missing payments is going to become a regular issue, you need to contact your lender as soon as possible to organise an alternative payment schedule and discuss further options.

You may also want to talk to a financial counsellor. 

How often is your data updated?

We work closely with lenders to get updates as quick as possible, with updates made the same day wherever possible.

Mortgage Calculator, Repayment Type

Will you pay off the amount you borrowed + interest or just the interest for a period?

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

Why was Real Time Ratings developed?

Real Time RatingsTM was developed to save people time and money. A home loan is one of the biggest financial decisions you will ever make – and one of the most complicated. Real Time RatingsTM is designed to help you find the right loan. Until now, there has been no place borrowers can benchmark the latest rates and offers when they hit the market. Rates change all the time now and new offers hit the market almost daily, we saw the need for a way to compare these new deals against the rest of the market and make a more informed decision.

What is a debt service ratio?

A method of gauging a borrower’s home loan serviceability (ability to afford home loan repayments), the debt service ratio (DSR) is the fraction of an applicant’s income that will need to go towards paying back a loan. The DSR is typically expressed as a percentage, and lenders may decline loans to borrowers with too high a DSR (often over 30 per cent).

Why is it important to get the most up-to-date information?

The mortgage market changes constantly. Every week, new products get launched and existing products get tweaked. Yet many ratings and awards systems rank products annually or biannually.

We update our product data as soon as possible when lenders make changes, so if a bank hikes its interest rates or changes its product, the system will quickly re-evaluate it.

Nobody wants to read a weather forecast that is six months old, and the same is true for home loan comparisons.

What is a construction loan?

A construction loan is loan taken out for the purpose of building or substantially renovating a residential property. Under this type of loan, the funds are released in stages when certain milestones in the construction process are reached. Once the building is complete, the loan will revert to a standard principal and interest mortgage.

What is appraised value?

An estimation of a property’s value before beginning the mortgage approval process. An appraiser (or valuer) is an expert who estimates the value of a property. The lender generally selects the appraiser or valuer before sanctioning the loan.

Mortgage Calculator, Interest Rate

The percentage of the loan amount you will be charged by your lender to borrow. 

How much is the first home buyer's grant?

The first home buyer grant amount will vary depending on what state you’re in and the value of the property that you are purchasing. In general, they start around $10,000 but it is advisable to check your eligibility for the grant as well as how much you are entitled to with your state or territory’s revenue office.

How can I get a home loan with bad credit?

If you want to get a home loan with bad credit, you need to convince a lender that your problems are behind you and that you will, indeed, be able to repay a mortgage.

One step you might want to take is to visit a mortgage broker who specialises in bad credit home loans (also known as ‘non-conforming home loans’ or ‘sub-prime home loans’). An experienced broker will know which lenders to approach, and how to plead your case with each of them.

Two points to bear in mind are:

  • Many home loan lenders don’t provide bad credit mortgages
  • Each lender has its own policies, and therefore favours different things

If you’d prefer to directly approach the lender yourself, you’re more likely to find success with smaller non-bank lenders that specialise in bad credit home loans (as opposed to bigger banks that prefer ‘vanilla’ mortgages). That’s because these smaller lenders are more likely to treat you as a unique individual rather than judge you according to a one-size-fits-all policy.

Lenders try to minimise their risk, so if you want to get a home loan with bad credit, you need to do everything you can to convince lenders that you’re safer than your credit history might suggest. If possible, provide paperwork that shows:

  • You have a secure job
  • You have a steady income
  • You’ve been reducing your debts
  • You’ve been increasing your savings

How can I calculate interest on my home loan?

You can calculate the total interest you will pay over the life of your loan by using a mortgage calculator. The calculator will estimate your repayments based on the amount you want to borrow, the interest rate, the length of your loan, whether you are an owner-occupier or an investor and whether you plan to pay ‘principal and interest’ or ‘interest-only’.

If you are buying a new home, the calculator will also help you work out how much you’ll need to pay in stamp duty and other related costs.

What is stamp duty?

Stamp duty is the tax that must be paid when purchasing a property in Australia.

It is calculated by the state government based on the selling price of the property. These charges may differ for first homebuyers. You can calculate the stamp duty for your property using our stamp duty calculator.

What is mortgage stress?

Mortgage stress is when you don’t have enough income to comfortably meet your monthly mortgage repayments and maintain your lifestyle. Many experts believe that mortgage stress starts when you are spending 30 per cent or more of your pre-tax income on mortgage repayments.

Mortgage stress can lead to people defaulting on their loans which can have serious long term repercussions.

The best way to avoid mortgage stress is to include at least a 2 – 3 per cent buffer in your estimated monthly repayments. If you could still make your monthly repayments comfortably at a rate of up to 8 or 9 per cent then you should be in good position to meet your obligations. If you think that a rate rise would leave you at a risk of defaulting on your loan, consider borrowing less money.

If you do find yourself in mortgage stress, talk to your bank about ways to potentially reduce your mortgage burden. Contacting a financial counsellor can also be a good idea. You can locate a free counselling service in your state by calling the national hotline: 1800 007 007 or visiting www.financialcounsellingaustralia.org.au.

What percentage of income should my mortgage repayments be?

As a general rule, mortgage repayments should be less than 30 per cent of your pre-tax income to avoid falling into mortgage stress. When mortgage repayments exceed this amount it becomes hard to budget for other living expenses and your lifestyle quality may be diminished.

Does each product always have the same rating?

No, the rating you see depends on a number of factors and can change as you tell us more about your loan profile and preferences. The reasons you may see a different rating:

  • Lenders have made changes. Our ratings show the relative competitiveness of all the products listed at a given time. As the listing change, so do the ratings.
  • You have updated you profile. If you increase your loan amount, the impact of different rates and fees will change which loans are the lowest cost for you.
  • You adjust your preferences. The more you search for flexible loan features, the more importance we assign to the Flexibility Score. You can also adjust your Flexibility Weighting yourself, which will recalculate the ratings with preference given to more flexible loans.