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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 an interest-only loan? How do I work out interest-only loan repayments?

An ‘interest-only’ loan is a loan where the borrower is only required to pay back the interest on the loan. Typically, banks will only let lenders do this for a fixed period of time – often five years – however some lenders will be happy to extend this.

Interest-only loans are popular with investors who aren’t keen on putting a lot of capital into their investment property. It is also a handy feature for people who need to reduce their mortgage repayments for a short period of time while they are travelling overseas, or taking time off to look after a new family member, for example.

While moving on to interest-only will make your monthly repayments cheaper, ultimately, you will end up paying your bank thousands of dollars extra in interest to make up for the time where you weren’t paying off the principal.

How can I negotiate a better home loan rate?

Negotiating with your bank can seem like a daunting task but if you have been a loyal customer with plenty of equity built up then you hold more power than you think. It’s highly likely your current lender won’t want to let your business go without a fight so if you do your research and find out what other banks are offering new customers you might be able to negotiate a reduction in interest rate, or a reduction in fees with your existing lender.

How long should I have my mortgage for?

The standard length of a mortgage is between 25-30 years however they can be as long as 40 years and as few as one. There is a benefit to having a shorter mortgage as the faster you pay off the amount you owe, the less you’ll pay your bank in interest.

Of course, shorter mortgages will require higher monthly payments so plug the numbers into a mortgage calculator to find out how many years you can potentially shave off your budget.

For example monthly repayments on a $500,000 over 25 years with an interest rate of 5% are $2923. On the same loan with the same interest rate over 30 years repayments would be $2684 a month. At first blush, the 30 year mortgage sounds great with significantly lower monthly repayments but remember, stretching your loan out by an extra five years will see you hand over $89,396 in interest repayments to your bank.

How much money can I borrow for a home loan?

Tip: You can use RateCity how much can I borrow calculator to get a quick answer.

How much money you can borrow for a home loan will depend on a number of factors including your employment status, your income (and your partner’s income if you are taking out a joint loan), the size of your deposit, your living expenses and any other debt you might hold, including credit cards. 

A good place to start is to work out how much you can afford to make in monthly repayments, factoring in a buffer of at least 2 – 3 per cent to allow for interest rate rises along the way. You’ll also need to factor in additional costs that come with purchasing a property such as stamp duty, legal fees, building inspections, strata or council fees.

If you are planning on renting the property, you can factor in the expected rental income to help offset the mortgage, but again it’s prudent to add a significant buffer to allow for rental management fees, maintenance costs and short periods of no rental income when tenants move out. It’s also wise to factor in changes in personal circumstances – the typical home loan lasts for around 30 years and a lot can happen between now and then.

What is the best interest rate for a mortgage?

The fastest way to find out what the lowest interest rates on the market are is to use a comparison website.

While a low interest rate is highly preferable, it is not the only factor that will determine whether a particular loan is right for you.

Loans with low interest rates can often include hidden catches, such as high fees or a period of low rates which jumps up after the introductory period has ended.

To work out the best value for money, have a look at a loan’s comparison rate and read the fine print to get across all the fees and charges that you could be theoretically charged over the life of the loan.

What is an investment loan?

An investment loan is a home loan that is taken out to purchase a property purely for investment purposes. This means that the purchaser will not be living in the property but will instead rent it out or simply retain it for purposes of capital growth.

Which mortgage is the best for me?

The best mortgage to suit your needs will vary depending on your individual circumstances. If you want to be mortgage free as soon as possible, consider taking out a mortgage with a shorter term, such as 25 years as opposed to 30 years, and make the highest possible mortgage repayments. You might also want to consider a loan with an offset facility to help reduce costs. Investors, on the other hand, might have different objectives so the choice of loan will differ.

Whether you decide on a fixed or variable interest rate will depend on your own preference for stability in repayment amounts, and flexibility when it comes to features.

If you do not have a deposit or will not be in a financial position to make large repayments right away you may wish to consider asking a parent to be a guarantor or looking at interest only loans. Again, which one of these options suits you best is reliant on many factors and you should seek professional advice if you are unsure which mortgage will suit you best.

What is 'principal and interest'?

‘Principal and interest’ loans are the most common type of home loans on the market. The principal part of the loan is the initial sum lent to the customer and the interest is the money paid on top of this, at the agreed interest rate, until the end of the loan.

By reducing the principal amount, the total of interest charged will also become smaller until eventually the debt is paid off in full.

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.

How do I refinance my home loan?

Refinancing your home loan can involve a bit of paperwork but if you are moving on to a lower rate, it can save you thousands of dollars in the long-run. The first step is finding another loan on the market that you think will save you money over time or offer features that your current loan does not have. Once you have selected a couple of loans you are interested in, compare them with your current loan to see if you will save money in the long term on interest rates and fees. Remember to factor in any break fees and set up fees when assessing the cost of switching.

Once you have decided on a new loan it is simply a matter of contacting your existing and future lender to get the new loan set up. Beware that some lenders will revert your loan back to a 25 or 30 year term when you refinance which may mean initial lower repayments but may cost you more in the long run.

Who has the best home loan?

Determining who has the ‘best’ home loan really does depend on your own personal circumstances and requirements. It may be tempting to judge a loan merely on the interest rate but there can be added value in the extras on offer, such as offset and redraw facilities, that aren’t available with all low rate loans.

To determine which loan is the best for you, think about whether you would prefer the consistency of a fixed loan or the flexibility and potential benefits of a variable loan. Then determine which features will be necessary throughout the life of your loan. Thirdly, consider how much you are willing to pay in fees for the loan you want. Once you find the perfect combination of these three elements you are on your way to determining the best loan for you. 

What are the responsibilities of a mortgage broker?

Mortgage brokers act as the go-between for borrowers looking for a home loan and the lenders offering the loan. They offer personalised advice to help borrowers choose the right home loan for their needs.

In Australia, mortgage brokers are required by law to carry an Australian Credit License (ACL) if they offer credit assistance services. Which is the legal term for guidance regarding the different kinds of credit offered by lenders, including home loan mortgages. They may not need this license if they are working for an aggregator, for instance, as a franchisee. In both these situations, they need to comply with the regulations laid down by the Australian Securities and Investments Commission (ASIC).

These regulations, which are stipulated by Australian legislation, require mortgage brokers to comply with what are called “responsible lending” and “best interest” obligations. Responsible lending obligations mean brokers have to suggest “suitable” home loans. This means loans that you can easily qualify for,  actually meet your needs, and don’t prove unnecessarily challenging for you.

Starting 1 January 2021, mortgage brokers must comply with best interest obligations in addition to responsible lending obligations. These require mortgage brokers to act in the best interest of their customers and also requires them to prioritise their customers’ interests over their own. For instance, a mortgage broker may not recommend a lender who gives them a commission if that lender’s home loan offer does not benefit that particular customer.

How do I calculate monthly mortgage repayments?

Work out your mortgage repayments using a home loan calculator that takes into account your deposit size, property value and interest rate. This is divided by the loan term you choose (for example, there are 360 months in a 30-year mortgage) to determine the monthly repayments over this time frame.

Over the course of your loan, your monthly repayment amount will be affected by changes to your interest rate, plus any circumstances where you opt to pay interest-only for a period of time, instead of principal and interest.

Can I change jobs while I am applying for a home loan?

Whether you’re a new borrower or you’re refinancing your home loan, many lenders require you to be in a permanent job with the same employer for at least 6 months before applying for a home loan. Different lenders have different requirements. 

If your work situation changes for any reason while you’re applying for a mortgage, this could reduce your chances of successfully completing the process. Contacting the lender as soon as you know your employment situation is changing may allow you to work something out. 

What happens to my home loan when interest rates rise?

If you are on a variable rate home loan, every so often your rate will be subject to increases and decreases. Rate changes are determined by your lender, not the Reserve Bank of Australia, however often when the RBA changes the cash rate, a number of banks will follow suit, at least to some extent. You can use RateCity cash rate to check how the latest interest rate change affected your mortgage interest rate.

When your rate rises, you will be required to pay your bank more each month in mortgage repayments. Similarly, if your interest rate is cut, then your monthly repayments will decrease. Your lender will notify you of what your new repayments will be, although you can do the calculations yourself, and compare other home loan rates using our mortgage calculator.

There is no way of conclusively predicting when interest rates will go up or down on home loans so if you prefer a more stable approach consider opting for a fixed rate loan.

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 a variable home loan?

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

What are extra repayments?

Additional payments to your home loan above the minimum monthly instalments, which can help to reduce the loan’s term and remaining payable interest.

How can I pay off my home loan faster?

The quickest way to pay off your home loan is to make regular extra contributions in addition to your monthly repayments to pay down the principal as fast as possible. This in turn reduces the amount of interest paid overall and shortens the length of the loan.

Another option may be to increase the frequency of your payments to fortnightly or weekly, rather than monthly, which may then reduce the amount of interest you are charged, depending on how your lender calculates repayments.

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.