Balance over time
| Year | Remaining balance | Principal paid so far | Interest paid so far |
|---|
How it works
- Work out the loan amount
Property price minus your deposit (in dollars or as a percentage — they stay in sync). This is what you're actually borrowing.
- Convert the annual rate to a per-period rate
Your interest rate is divided by the number of repayments per year (12 for monthly, 26 for fortnightly, 52 for weekly).
- Apply the repayment formula
The standard principal & interest formula solves for a fixed repayment amount that fully pays off the loan — principal and all interest — by the end of the term.
- Handle interest-only, if selected
During an interest-only period, each repayment covers interest alone — the balance doesn't reduce. Once that period ends, a new (higher) principal & interest repayment is calculated to clear the remaining balance over what's left of the term.
- Simulate the balance year by year
Each period, interest is charged on the remaining balance, and (once in principal & interest mode) the rest of the repayment reduces the principal — run forward to build the balance-over-time table above.
Worked example
At 85% LVR, Marcus is above the 80% threshold, so the calculator flags Lenders Mortgage Insurance as likely — an extra cost this tool doesn't add to the numbers above. Over the full 30 years, more than half of everything he repays (54%) is interest, not principal — the cost of borrowing long-term.
If Marcus instead chose 5 years interest-only on the same loan, his repayment would start lower at $3,241/month — but once the interest-only period ends, it steps up to $4,146/month (28% higher) for the remaining 25 years, and he'd pay roughly $47,600 more interest in total than going principal & interest from day one.
Methodology & assumptions
Repayment formula. Standard reducing-balance principal & interest formula: M = P × r(1+r)^n / ((1+r)^n − 1), where P is the loan amount, r is the periodic interest rate, and n is the number of repayment periods. For interest-only loans, the interest-only repayment is simply P × r each period (the balance doesn't change), and a new repayment is calculated with this same formula once that period ends, using the remaining term.
Constant rate. Assumes the interest rate stays the same for the entire term. In reality, variable rates change and fixed-rate periods usually only cover 1–5 years of a much longer loan.
LVR & LMI. Loan-to-value ratio (loan ÷ property price) above 80% typically requires Lenders Mortgage Insurance (LMI), which is not calculated or added here.
Not included: application/valuation fees, ongoing account fees, offset or redraw accounts, extra repayments, and stamp duty or other purchase costs.
This tool is for general illustration only and is not lending or financial advice — for an actual borrowing capacity or rate, speak with a mortgage broker or lender.