When you make a home loan repayment, you’re paying two things at once: a slice that goes toward the interest the lender charges, and a slice that goes toward the principal, the amount you originally borrowed and still owe.
Most Australian home loans use principal and interest (P&I) repayments, where each instalment is a fixed total covering both. What changes over the life of the loan isn’t the total repayment, it’s the mix. Early on, most of your repayment goes toward interest. Later, most of it goes toward principal.
Interest is charged on whatever balance you still owe, so it’s highest when the loan is newest. As you chip away at the principal, less interest accrues each month, freeing up more of your fixed repayment to reduce the balance further. That’s why a mortgage can feel slow in the early years and faster toward the end, you’re not being charged more early on, the balance is just working against you the most when it’s largest.
This calculator lets you enter your loan amount, interest rate, loan term and repayment frequency to see how much of each repayment goes where, how much interest you’ll pay in total, and how long the loan will take to pay off.
This calculator provides general information only and doesn’t take your personal financial situation into account. Speak with a licensed mortgage broker or financial adviser before making borrowing decisions.
Here’s a worked example using a loan amount and rate in the current typical range. As at August 2026, advertised variable home loan rates for owner-occupiers on P&I sit roughly between 5.8% p.a. and 6.5% p.a., with around 50 lenders now offering rates below 6% p.a. (Canstar, updated 23 August 2026). We’ve used a rate roughly in the middle of that range.
Loan details: $600,000 borrowed, 6.19% p.a. variable rate, 30-year term, monthly repayments.
- Monthly repayment: $3,671
- Total repaid over 30 years: $1,321,614
- Total interest paid: $721,614
Now let’s look at how that $3,671 monthly repayment splits between interest and principal in year 1 versus year 15:
The repayment hasn’t moved, but by year 15, more than double the share of each repayment is chipping away at the balance compared with year 1. This is why extra repayments made early in a loan are disproportionately valuable: a dollar of extra principal paid in year 1 stops 30 years of interest accruing on it, while the same dollar paid in year 25 only stops five years of interest.
Figures are illustrative and rounded, and assume the rate and repayment stay constant over the full term, which real variable-rate loans rarely do. Use the calculator above with your own numbers.
The other common repayment structure is interest-only, where your repayment covers just the interest and none of the principal, usually for a set period (commonly one to five years) before the loan reverts to P&I.
Principal and interest (P&I) pays down the loan from day one, so your equity grows with every repayment, and total interest is lower because the balance it’s calculated on keeps shrinking. Repayments are higher than an equivalent interest-only period, and it’s the default structure for most owner-occupier loans, lenders increasingly require it for a larger share of investor lending too.
Interest-only repayments are lower during the interest-only period, which can help cash flow, a common reason investors use it, since the interest is often tax-deductible against rental income. But you build no equity through repayments, and once the period ends, repayments step up noticeably as the remaining principal is repaid over a shorter term, a common source of “repayment shock.” Total interest over the loan’s life is higher than an equivalent P&I loan.
There’s no universally “right” choice, it depends on your goals, whether the property is owner-occupied or an investment, and your broader cash flow position. This is general information, not a recommendation; a mortgage broker can model both options against your actual numbers.
Lenders generally charge investors a bit more than owner-occupiers for an equivalent loan, and interest-only loans typically carry a slightly higher rate than P&I loans on the same property, usually a difference in the order of a few tenths of a percentage point, moving with market conditions and lender risk appetite.
As at August 2026, the RBA’s cash rate target sits at 4.35% p.a., held at the Board’s 11 August 2026 meeting after three increases earlier in the year (RBA). Advertised variable home loan rates currently span roughly 5.8% to 6.5% p.a. for owner-occupier P&I loans, with the lowest rates on Canstar’s database around 5.69–5.89% p.a. depending on the lender (Canstar). Fixed rates sit in a broadly similar band, though the comparison shifts with where the market expects the cash rate to head next, compare actual lender offers side by side with our Home Loan Interest Rate Comparison Calculator.
The calculator’s outputs give you the full picture at a glance:
- Repayment amount, what you’ll pay each period, based on the loan amount, rate and term entered.
- Total interest, every interest charge over the full term, assuming the rate and repayment stay unchanged.
- Total paid, total interest plus the original loan amount: everything the loan costs if held to term with no extra repayments.
- Loan length, how long the loan runs at the repayment shown, useful for testing how extra repayments shorten the term.
Treat these as a like-for-like comparison tool rather than a forecast, real variable rates move, and most borrowers refinance, pay extra, or make life changes well before a 30-year term is up.
To keep the maths transparent, the calculator makes a few simplifying assumptions:
- Month length, interest calculations account for the actual number of days in each month, rather than treating every month as equal length.
- Weeks and fortnights per year, weekly and fortnightly calculations assume exactly 52 weeks or 26 fortnights per year, which slightly undercounts a true 365/366-day year, a minor effect, but worth knowing if reconciling against your lender’s own schedule.
- Rounding, each repayment is rounded to the nearest cent, with a final adjusting repayment at the end of the term.
These are standard simplifications used across most repayment calculators, useful for comparing scenarios against each other, not a substitute for your lender’s official schedule.
Before comparing loans, it’s worth confirming how much you’re actually likely to be approved for with our Borrowing Power Calculator. A lower headline rate isn’t the only thing that determines whether a loan is right for you. Worth checking:
- Comparison rate, folds the interest rate and most standard fees into a single percentage, making loans with different fee structures easier to compare.
- Offset or redraw facilities, an offset account reduces interest by offsetting your savings against the balance; redraw lets you access extra repayments if needed. Both can meaningfully change the real cost of a loan.
- Rate type, fixed rates lock in certainty but usually limit extra repayments and can carry break costs; variable rates move with the market but tend to offer more flexibility.
- Loan purpose, owner-occupier and investment loans are priced and assessed differently, so make sure any quote matches your actual purpose.
- Fees, application, ongoing and discharge fees vary by lender and can offset a lower advertised rate.
What’s the difference between the interest rate and the comparison rate? The interest rate is applied to your outstanding balance to calculate interest charges. The comparison rate folds in most standard fees for a fuller picture of true cost, making it more useful for comparing offers between lenders.
Why is most of my early repayment going to interest instead of principal? Interest is calculated on your current balance, which is highest at the start. As the balance falls, less interest accrues, so more of your fixed repayment goes toward principal, standard for every P&I loan, not specific to your lender.
Will extra repayments actually shorten my loan term? Generally yes, provided your loan allows them without penalty (most variable loans do; some fixed loans restrict them). Extra repayments reduce the principal directly, which cuts future interest and can shorten the term or lower future repayments.
Should I choose principal and interest or interest-only? Depends on your goals. P&I builds equity from day one and costs less in total interest; interest-only can help short-term cash flow, particularly for investors, but builds no equity through repayments and costs more overall. A broker can model both against your numbers.
How accurate is the calculator’s total interest figure? Accurate for the scenario entered, assuming the rate and repayment stay constant for the full term. In practice, variable rates move and most borrowers make extra repayments or refinance, so treat it as a comparison point rather than a fixed forecast.
Does the calculator account for fees? No, it calculates repayments and interest from loan amount, rate, term and frequency only. Use the comparison rate for a rough sense of total cost including standard fees, and check your loan’s fee schedule for anything it doesn’t capture.
