How to easily calculate your potential mortgage repayments

How much are my mortgage repayments? This is usually the question on most borrower's minds. From mortgage terms to interest rates and everything in between, at the end of the day, most borrowers just want to know how much they’re going to have to fork out each fortnight or month.

Here are five reasons why you should consider calculating your potential mortgage repayments.

1. Benefits to understanding your mortgage repayments

Before we get into the nitty gritty of calculating your potential mortgage repayments, it can be worth understanding some of the benefits that come with understanding your loan repayments. Understanding your mortgage repayments is an essential part of the home-buying process, and while it offers a range of different benefits it can also help you to avoid any costly mistakes too.

2. Get a clearer picture of what you can afford

One of the main benefits of working out your repayments in advance is that it can help you with your budgeting so you can avoid potentially overextending yourself. While a lender might be willing to lend you a certain amount of money, can you actually afford to service this amount when you break it down into your monthly repayments?

3. Understand how interest rate changes can impact your repayments

While we’re on the topic of affordability, will you be able to afford your mortgage repayments if the current interest rate were to increase? Understanding how interest rate changes affect your repayments is an important part of the borrowing process, especially if you’ve got a variable interest rate that fluctuates with these changes.

Check out our other blogs to learn more about how interest rates are determined and how RBA changes affect your repayments.

4. Provides a basis for comparison

Working out your estimated monthly repayments can be a great way to compare potential loans and lenders. For many borrowers, finding an affordable home loan is one of their top priorities, so comparing your options based on the repayments can help to point you in the right direction.

5. Peace of mind

There’s no doubt that the home-buying process is one of the most stressful experiences you’ll go through, but a little peace of mind can go a long way to lightening the load. Having a clear understanding of your mortgage repayments helps to reduce financial stress and uncertainty. Knowing that you can afford your mortgage repayments and continue to service your loan in the event that interest rates rise is a great way to put your mind at ease so you can focus on enjoying your new home.

How to work out repayments on a mortgage

While some banks and lenders might use their own formula to calculate mortgage repayments, it’s not that difficult to work out how much interest you’ll be up for. You’ll just need two key pieces of information, including:

• The principal or outstanding mortgage balance
• The interest rate

Most banks and lenders tend to calculate interest daily and charge it monthly. With that said, you can usually opt to make repayments on a more regular basis if it works for you.

Once you have these figures, you can sub them into the following equation:

(Principal x Interest Rate) / 365 = Daily Interest Charged

For example, if you were to take out a $500,000 loan with an interest rate of 4.5%, you would work it out like this:

(500,000 / 0.045) / 365 = $61.64 daily interest

To work out how much interest you would pay each month, you just have to multiply the daily interest charged by the number of days in the month:

$61.64 x 30 = $1,849.20 monthly interest

Because the number of days in a month often changes, you might notice your monthly repayments fluctuating.

Based on the above calculations you’d be paying around $1,849.20 in interest each month. If you were making interest-only repayments, this would be the total amount you would pay. However, most borrowers would also be contributing towards the principal amount, so don’t forget to factor this into your repayment calculations too.

Use Unloan’s mortgage calculators

Although it may seem simple, doing math isn’t for everyone. That’s why we developed our very own set of calculators at Unloan.

By using our calculators, you can see:

• An estimate of your minimum monthly repayments by refinancing to Unloan
• What changes occur if you make additional repayments
• An estimate of how much interest you could save by refinancing to Unloan
• How our annual discount works over the life of your loan

At Unloan, we figure out your repayments by taking your loan amount, adding the total estimated amount of interest we charge over the life of the loan, applying the annual rate discount that increases every year (up to 30 years) and then dividing that total up into a monthly amount based on the length of your loan term.

Using the repayment calculator is simple. All you have to do is choose what type of loan you’re looking at calculating the repayments for, whether it’s for a live-in (owner-occupied) loan or an investment loan. Then enter the loan amount, loan term and whether you’re planning on making any additional repayments. These factors will affect the minimum repayment amount.

Once you’ve entered all the information, you’ll be shown a visual graph of an estimate of what you could save every year when refinancing to Unloan. You’ll also be able to see how your current repayments stack up against your potential new repayments if you were to refinance with Unloan, along with an estimate of how much you could save over the life of your loan.

It’s worth noting that these calculations are an estimate provided as a guide only. They’re calculated based on our current advertised rate and assume this rate continues for the life of the loan, but interest rates can change at any time.

Keen to learn more about Unloan’s home loan features? Explore what makes Unloan so unique today.

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This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.‍

Unloan is a division of Commonwealth Bank of Australia.

Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).

Unloan offers a 0.01% per annum discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.

*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.