Loan Repayment Calculator

Three inputs produce the repayment: the amount borrowed, the interest rate and the term. Change any one of them and the repayment moves. The tool also shows total interest across the life of the loan, which is the figure people look at least and should look at most.

Where the money actually goes

A principal and interest repayment is one payment doing two jobs. Part of it covers the interest charged since the last payment. The rest reduces the balance. Early in a loan, most of the payment is interest, because interest is charged on a large balance. As the balance falls, the interest portion falls with it and more of the same payment goes to principal.

That is why the first few years feel slow and the last few move quickly, and why an extra payment made early is worth considerably more than the same payment made late.

Term does more than rate over long periods

A shorter term raises the repayment and cuts total interest sharply. A longer term does the reverse. When you are comparing options, change one variable at a time so you can see which lever is actually moving the answer.

• The rate stays where you put it for the entire term. On a variable loan it will not.
• Repayments are equal and made on schedule, with none missed.
• Interest is calculated on the reducing balance and charged at the same frequency as the repayment.
• There are no fees, no redraw, no offset and no lump sums.
• The loan is drawn in full on day one, which is not how construction lending works.
• The term runs the whole way. Most loans are refinanced or repaid before they do.

Test the repayment at a rate above the one you expect. If the household or the business cannot carry that figure, the loan is sized wrong, whatever today's rate happens to be.

• Application, establishment and settlement fees.
• Ongoing monthly or annual account and package fees.
• Lenders mortgage insurance where the loan-to-value ratio requires it.
• Council rates, water, strata, insurance and maintenance on a property.
• Rate changes, and the way a variable repayment moves with them.
• Any offset balance or extra repayment, which both change the real cost.

Two loans at the same rate can cost different amounts once fees are counted, and a slightly higher rate with no ongoing fee sometimes wins on a smaller balance. Compare the whole cost of the facility rather than the headline number.

1. 01Run the figure at your expected rate, then again two percentage points higher, and check both against your actual budget.
2. 02Compare terms as well as rates. The difference between twenty-five and thirty years is larger than most people assume.
3. 03Add the fees you know about, so you are comparing facilities rather than headlines.
4. 04Talk it through with a broker before you apply anywhere, so the file goes to a lender that suits it.

Call WeL’nd and we will run the real numbers with you, including the ones a calculator cannot see.