Why use this calculator
Principal and interest is only part of what a house costs each month. Council rates, land tax, building insurance and strata levies arrive regardless, and leaving them out of the budget is how people end up house-rich and cash-poor. This calculator puts them in the same monthly figure, then shows the amortisation schedule that explains why the balance moves so slowly at first.
It also flags the deposit threshold that triggers lenders mortgage insurance, which is one of the largest avoidable costs in a first purchase and is often discovered far too late. Seeing total interest beside the repayment is what turns an abstract thirty-year commitment into a figure you can weigh against a shorter term.
How to use it
- Enter the purchase price and the cash deposit you will contribute. The loan is the difference between them.
- Use your actual or quoted interest rate rather than an advertised headline, since the rate you are offered depends on your loan-to-value ratio and your lender.
- Council rates come from the rates notice for the property, which an agent can usually provide, and building insurance from a quote or a comparable policy.
- If you are buying an apartment, put the strata levies in the insurance field.
- The deposit percentage result will tell you whether lenders mortgage insurance is likely.
What each result means
- Deposit needed for 20%
- How much more deposit would reach 20 per cent of the price, the level at which lenders usually stop charging lenders mortgage insurance. Shown only when your deposit is below it.
- If you pay half of it every fortnight
- What changes if you pay half the principal and interest every fortnight instead of monthly. A year has 26 fortnights, so you make one extra monthly repayment a year and finish sooner.
- Total monthly repayment
- Everything the property costs each month before maintenance. The figure to test against your take-home pay.
- Principal and interest
- The loan repayment itself, which is what the lender assesses for serviceability.
- Monthly rates and land tax
- Council rates spread monthly. They rise over time and are not optional.
- Monthly insurance
- Building insurance or strata levies spread monthly. Strata in particular can rise sharply after a special levy.
- Loan amount
- Price minus deposit. This is what interest is charged on, and what lenders mortgage insurance is assessed against.
- Deposit percentage
- Your deposit as a share of the price. Twenty per cent is the threshold at which lenders mortgage insurance is usually avoided.
- Total interest over the term
- The full cost of borrowing. On a thirty-year loan it often approaches or exceeds the amount borrowed.
- Total repaid over the term
- Loan plus interest. What the borrowing costs in total, before rates, insurance and maintenance.
The formula
Principal and interest use the amortisation formula
M = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ − 1]
- P
- the loan amount (price minus deposit)
- r
- the monthly rate
- n
- the number of monthly payments
Annual rates and insurance are divided by twelve and added, so the total monthly cost is P&I plus (annual rates ÷ 12) plus (annual insurance ÷ 12). Deposit percentage is deposit divided by price.
How this number is used in practice
Lenders assess serviceability at a rate two to three percentage points above the current one, and you should too. On an $640,000 loan, a three point rise adds roughly $1,300 a month. A purchase that only works at today's rate is a purchase that depends on rates never rising, which is not a plan.
Lenders mortgage insurance protects the lender, not you, and applies when borrowing above eighty per cent of the property value. On a $700,000 purchase with a ten per cent deposit it can exceed $20,000, usually capitalised into the loan so you pay interest on the premium for decades.
Saving to twenty per cent, using a guarantor or qualifying for a government guarantee scheme are the ways around it.
Budget separately for maintenance. A common rule is one per cent of the property's value a year, which on an $800,000 home is $8,000. A figure that averages out over a decade but arrives unevenly, often as a hot water system in the same year as a roof repair.
Worked examples
$800,000 property, 20% deposit, 6.2% over 30 years
Principal and interest about $3,920 a month, total around $4,270 including rates and insurance, with roughly $771,000 of interest over the term.
The same property with a 10% deposit
Loan rises to $720,000 and the repayment by about $490 a month, plus lenders mortgage insurance capitalised into the loan.
$800,000 property, 20% deposit, 6.2% over 20 years
Repayment rises to about $4,660 for principal and interest but total interest falls by roughly $300,000.
When people use it
- Working out the true monthly cost of a property before making an offer
- Comparing deposit sizes and the lenders mortgage insurance threshold
- Stress-testing a purchase against higher interest rates
- Deciding between a twenty-year and thirty-year term
- Checking how much of each repayment is interest in the early years
Tips
- Test the repayment at two to three percentage points above today's rate. That is roughly the buffer lenders apply, and it exists for a reason.
- A twenty per cent deposit avoids lenders mortgage insurance, which on a large loan can exceed $20,000 and is usually added to the loan.
- Housing costs above about a third of take-home pay leave little room for rate rises, maintenance or a change in circumstances.
- Budget one per cent of the property value a year for maintenance, and expect it to arrive unevenly rather than monthly.
- An offset account reduces the balance interest is calculated on while keeping the money accessible. Usually better than paying into the loan.
- Strata levies can rise sharply after a special levy is struck. Read the strata report before committing to an apartment.
What it assumes, and where it stops being accurate
- A fixed interest rate for the entire term. Variable rates will move, often several times over thirty years.
- Lenders mortgage insurance is flagged but not calculated. It depends on the lender, the loan size and the loan-to-value ratio.
- Council rates and insurance are held flat, whereas both typically rise with inflation or faster.
- Maintenance, repairs and strata special levies are not included.
- Stamp duty, conveyancing and loan establishment fees are upfront costs and are not part of the monthly figure.
Terms used on this page
- Loan-to-value ratio (LVR)
- The loan as a percentage of the property value. Above 80% usually triggers lenders mortgage insurance.
- Lenders mortgage insurance
- A premium protecting the lender against default, charged to the borrower on high-LVR loans.
- Offset account
- A transaction account whose balance is subtracted from the loan before interest is calculated.
- Serviceability buffer
- The margin above the current rate at which lenders test whether you could still afford repayments.
Questions people ask
- How much deposit do I need for a house?
- Twenty per cent of the purchase price avoids lenders mortgage insurance and is the usual target. Many lenders accept five or ten per cent with insurance added, and government guarantee schemes allow smaller deposits for eligible buyers. Remember that stamp duty and legal costs sit on top of the deposit and are also cash.
- What is lenders mortgage insurance and who does it protect?
- It protects the lender if you default, not you, and it is charged when you borrow more than eighty per cent of the property value. The premium is usually capitalised into the loan, so you pay interest on it for the life of the mortgage. On a large loan with a small deposit it can exceed $20,000.
- How much house can I afford?
- A common guide is keeping total housing costs under about a third of take-home pay, though what matters more is the buffer left afterwards. Run the repayment at a rate two to three points higher and check the result still leaves room for rates, insurance, maintenance and a change in circumstances.
- Are council rates and insurance included in my repayment?
- In Australia, generally no. You pay them directly, so budget for them separately even though this calculator shows them monthly. In the United States, lenders commonly collect property tax and insurance in escrow alongside the mortgage payment, which is why American quotes often look higher for the same loan.
- Should I choose a 20-year or 30-year mortgage?
- A twenty-year term costs dramatically less in total interest but demands a much higher repayment. Taking the thirty-year term and voluntarily paying it at the twenty-year rate captures most of the saving while keeping the ability to fall back to the lower required payment if your circumstances change.
- Why is almost all of my early repayment interest?
- Interest is charged on the outstanding balance, which is at its highest at the start. The fixed repayment covers that interest first and only the remainder reduces the principal. As the balance falls the interest charge falls with it, so later repayments shift steadily toward principal. Which is why the schedule accelerates.
Use this with
Mortgage Calculator answers one part of the question. These pick up where it stops: Loan Repayment Calculator, Home Affordability Calculator, Mortgage Offset Calculator, Stamp Duty Calculator and Rent vs. Buy Calculator.
Where these figures come from
This calculation is jurisdiction-neutral arithmetic. No country-specific rules are applied.
- ASIC Moneysmart: loans and credit. Independent Australian guidance on borrowing costs
- Reserve Bank of Australia: indicator lending rates. Published lending and deposit rates
Mortgage Calculator produces an estimate for general information. It is not financial, tax, medical, legal or engineering advice. read the full disclaimer. Spotted a wrong number? Report it and it gets fixed. The form picks up this calculator and the inputs you used.