Mortgage Repayment
Calculator

How Mortgage Repayments Work in Australia

Your mortgage repayment has two components: principal (the amount you borrowed) and interest (the lender's fee for lending it). In the early years of a principal and interest (P&I) loan, the vast majority of each repayment is interest. On a $750,000 loan at 6.2% over 30 years, your first monthly repayment of approximately $4,576 includes around $3,875 in interest and only $701 in principal reduction. By year 25, those proportions reverse.

Monthly vs fortnightly repayments — the real maths

Switching from monthly to fortnightly repayments is one of the simplest ways to reduce your loan term and total interest. The mechanism is simple: there are 26 fortnights in a year, so you make the equivalent of 13 monthly payments instead of 12. On a $750,000 loan at 6.2%, switching to fortnightly repayments from day one saves approximately $78,000 in interest and cuts about 3.5 years off a 30-year loan term — purely through payment timing.

The power of extra repayments

Adding just $100 extra per month to a $750,000, 30-year loan at 6.2% saves approximately $42,000 in total interest and reduces the loan term by around 2 years and 4 months. The earlier you start making extra repayments, the more powerful the compounding effect — because every dollar of principal you eliminate today saves you years of future interest charges on that same dollar.

Principal and Interest vs Interest-Only

Interest-only (IO) loans have lower repayments during the IO period but you make zero progress on reducing your debt. At the end of the IO period — typically 5 years — your repayments jump significantly as the remaining balance is amortised over a shorter remaining term. IO loans are primarily used by investors managing cash flow, not owner-occupiers building equity. APRA has imposed stricter serviceability requirements on IO lending since 2017.