Mortgage Calculator
A mortgage is a loan used to purchase property, typically repaid over 15–30 years via equal monthly instalments. The repayment amount is calculated using the standard annuity formula: M = P × r(1+r)^n / ((1+r)^n − 1), where P is the principal (loan amount), r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments. Early in the loan the majority of each payment covers interest; over time more goes to principal — this gradual shift is called amortisation. Most lenders require mortgage insurance (called LMI in Australia, PMI in the US) when a borrower's deposit is below 20% of the property value, as it protects the lender against default risk. Fixed-rate mortgages lock in your interest rate for a set period — typically 1–10 years depending on the market — providing repayment certainty but less flexibility. Variable (adjustable) rates move with market conditions and central bank decisions, meaning repayments can rise or fall over the life of the loan. Enter your home price, deposit, interest rate, and loan term below to calculate your monthly repayment, total interest paid, and the full cost of your mortgage.
Frequently Asked Questions
How much deposit do I need to buy a home?
Most lenders require at least a 5–10% deposit, but 20% is the standard target to avoid mortgage insurance (known as LMI in Australia or PMI in the US). Mortgage insurance protects the lender — not you — if you default and the property sale falls short of the outstanding loan. The premium varies by country and lender but is typically 1–4% of the loan amount. Reaching a 20% deposit eliminates this cost entirely. Some government first-home-buyer schemes allow lower deposits without the insurance requirement, so it's worth checking what programmes are available in your country.
What is the difference between principal and interest vs interest-only?
A principal and interest (P&I) loan has repayments that cover both interest and a portion of the principal with every payment, progressively reducing the debt and building equity. An interest-only (IO) loan has repayments that cover just the interest; the principal balance stays the same until the IO period ends (typically 1–5 years). IO loans have lower short-term repayments but cost significantly more over the life of the loan. P&I is standard for owner-occupiers; IO is sometimes used by investors who prioritise cash flow or expect to sell before the IO period expires.
What is home equity and how do I build it?
Equity is the difference between your home's current market value and the outstanding balance on your mortgage. A home worth $700,000 with $450,000 remaining on the loan gives you $250,000 in equity. Equity grows in two ways: paying down the loan principal over time, and property value appreciation. You can access built-up equity through a refinance, home equity loan, or line of credit to fund renovations, investments, or other large expenses. Making extra repayments accelerates equity growth by reducing the principal faster than the scheduled amortisation.
How much can I borrow for a mortgage?
Lenders typically cap borrowing at 4–6× your gross annual income, though the exact limit depends on your expenses, existing debts, credit score, and whether you're applying alone or jointly. A borrower earning $80,000 per year might qualify for $320,000–$480,000. Lenders stress-test affordability at a higher rate (usually 2–3% above the actual rate) to ensure you could still repay if rates rise. Getting a pre-approval or mortgage-in-principle before house hunting tells you your realistic budget and shows sellers you're a serious buyer.
Should I choose a fixed or variable mortgage rate?
Variable (adjustable) rate mortgages move with market interest rates, so repayments can rise or fall. They typically allow extra repayments without penalty and offer more flexibility overall. Fixed rates lock in your repayment for a set term — usually 1–10 years depending on the market — giving you certainty regardless of rate movements, but often at a slightly higher initial rate and with penalties for early exit. A common strategy is to split the loan: fix a portion for certainty while keeping the rest variable for flexibility. The right choice depends on your income stability and your view on where rates are heading.
Do extra repayments make a big difference?
Yes — extra repayments reduce the principal faster, which means less interest accumulates each month. On a $500,000 loan at 6% over 30 years, an extra $200/month saves roughly $75,000 in total interest and cuts about 4 years off the loan term. Even occasional lump-sum repayments have a disproportionate impact early in the loan when the balance is highest. Most variable rate mortgages allow unlimited extra repayments; fixed rate loans typically have an annual cap (often 10% of the outstanding balance) before extra-repayment fees apply.