How is a mortgage repayment worked out?
A repayment is the same amount each time, set so that the loan reaches zero on its last day. Each time you pay, the interest for that period is charged on the balance, and what is left of the repayment pays the balance down. Early on most of a repayment is interest, and later most is principal. A lower rate or a shorter term changes both, which the rate slider shows.
An offset account is cash held against the loan. Interest is charged on the loan less the offset, so the repayment stays the same and more of it pays the balance down. An interest only period keeps the balance where it is. When principal and interest start, the same loan is repaid over fewer years, so the repayment is higher.
For a loan for an investment property, the interest is a cost of earning the rent. The negative gearing calculator shows what a rental loss does to your tax in 2027-28.
What this leaves out
- Fees, and any change in the rate over the years.
- An offset balance that rises or falls. The balance you enter stays for the whole loan.
- Extra repayments during the interest only years. They start with principal and interest.
- The tax the interest saves. It depends on your income and the year, and the rental calculators work it.
- Switching to another loan. Refinance in the app compares a new rate.