How to Work out Home Loan Repayments

10 May 2017
How to Work out Home Loan Repayments

For most homeowners, home loan repayments will be a primary consideration and a determining factor in their choice of home. For first home buyers particularly, the financial side of things can seem daunting, with so much to think about already. Fortunately, there is a range of tools and guides available to help take the guesswork out of things, so you always know where you stand with your repayments.

When it comes to customising your loan, there are some key things you will need to consider. Let's take a look at how to take the stress out of your home loan repayments.

  • Determine the amount you will borrow. This will be the cost of the property minus the deposit you have saved. 
  • Decide on the duration of the loan term. This is the amount borrowed, divided over a set course of time. For example, most lenders will offer up to 30 years, with an option to repay the loan before that time. The term of your loan will determine the amount of your regular repayments. 
  • Consider the interest rate. Certain loans come with certain conditions. A lower interest rate can be negotiated where the lender has confidence in the borrower. Lo Doc loans or a low deposit loan may attract a slightly higher interest rate.

Interest rates are also always changing. The interest rate applied to your loan will depend on whether you have selected a fixed or variable agreement. A fixed rate will keep the interest rate consistent for the duration of the fixed period while a variable rate will see the rate change as interest rates change. You can also elect to pay principal and interest or interest only. Interest only agreements are usually only available for a limited period but can be used in times of financial hardship. For more information on finding the right loan, talk to our financial partners at MyChoice Home Loans.

Home Loan Repayment Schedule

Depending on your circumstances, you may select weekly, fortnightly or monthly repayments. The patterns of your work, salary or frequency of pay will affect your ability to make regular repayments. While many people prefer a monthly mortgage repayment, making payments weekly can increase the amount you are paying off per year, as well as keeping things more manageable.

Top Tips for Repaying Your Mortgage

Reducing the term of the mortgage is ultimately the best way forward for you financially. Paying off principal and interest from the beginning at the highest rate you can manage will soon bring the interest down, reducing the length of the loan term.

There is a range of resources and advice available to assist you with getting ahead on loan repayments and they are worth considering. Maintaining monthly repayments is a good start, but adding to these with extra savings can make a big difference. Collecting loose change, increasing payments when things are going well, and making occasional lump sum repayments such as around tax time can all help to take years and dollars off your loan.

Further Reading


If you would like to learn more about building your first home or adding a property to your investment property portfolio, phone McDonald Jones Homes on 1300 555 382 or contact us today!