A home loan is the biggest expense most of us will ever have. While the home itself will cost several hundred thousand dollars at least, the interest component of that loan could easily add another couple of hundred thousand dollars. Home loans can commonly last 25-30 years, which is a long time to be paying something off. The longer the loan is for, the more interest you’ll have to pay.
Any extra repayment you make - be it lump sum repayments or recurring repayments above the minimum - can save you money by reducing the principal on the loan, aka the borrowed amount left to repay. Interest is charged on this principal amount, so the smaller the principal, the less there is to charge interest on.
Our extra and lump sum payment calculator helps you see how much you could potentially save by making extra repayments or a one-off lump sum payment.
Your estimated results
By paying extra, you could reduce your loan term by 30 years 0 month and save $0 in interest.
5.10 %
30 years
monthly
$0
0 year
$0
0 year
$0
$0
$0
30 years 0 month
Calculator assumptions
Extra & lump sum payment calculator assumptions
The figures provided should be used as an estimate only, should not be relied on as true indication of your home loan repayments, or a quote or indication of pre-qualification for any home loan product. The figures are based upon the information you put into the calculator. We have made a number of assumptions when producing the calculations including:
- Loan term and loan amount: We assume the loan term and loan amount are what you enter into the calculator.
- Interest rates: We assume that the rate you enter, is the rate that will apply to your loan for the full loan term - even if you choose:
- a variable rate;
- or an interest only rate which, in practice, will only apply for a limited period after which a different rate will apply.
- Interest and repayments: The displayed total interest payable is the interest for the loan term, calculated on the entered interest rate. We make the following assumptions about repayments
- repayments are made monthly.- your annual interest charge is divided equally over 12 monthly payments (in practice, interest is calculated daily and charged monthly which can lead to your interest charge varying between months).
- interest is charged to the loan account at the same frequency and on the same day as the repayments are made (this may not be the case in practice).
- only your initial repayment amount is calculated. We assume that this repayment amount is payable for the loan term. In practice, repayment amounts can change for a variety of reasons.
- weekly and fortnightly loan repayment amounts are assumed to be a quarter and a half of the monthly repayment amount respectively.
if added, your extra repayment is taken to be made at the same time as your monthly repayment.
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How to use our Extra & Lump Sum Payment calculator
Our Extra Repayments Calculator will ask you to input a few important pieces of information for it to perform its number crunch.
This information will include:
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The loan amount and the loan term (the length of the loan)
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Your loan’s interest rate
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Your repayment frequency
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How much your extra payment will be, and if it will be once off or monthly
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Where in the loan schedule you’ll make these extra repayments
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How does a lump sum payment affect my mortgage?
Placing a lump sum payment on your mortgage won’t lower your repayments. It will help you to save on interest and lower the total amount outstanding on your mortgage. Since the amount of interest is based on the principal of the loan, the lower this amount, the lower the interest rate. By making a lump sum or extra payments you could save tens of thousands of dollars.
How will extra repayments affect my mortgage?
Like the lump sum payments, making extra repayments on your mortgage could cut the interest charged on your loan and reduce the time it takes to pay off your mortgage.
Interest is charged on the principal amount and in the early years of a loan most of your minimum repayment goes towards paying that interest. Only a certain portion of the repayment goes towards the principal amount.
Our Extra Repayment Calculator outlines the impact of making regular extra payments to your loan.
Extra And Lump Sum Payment FAQs
Can repayment frequency save me money?
By paying your mortgage repayments weekly or fortnightly, the extra money in redraw or offset will bring down how much interest you pay every month or accrue every day, and throughout the life of your loan.
Making extra home loan repayments can prove useful. Depending on whether your home loan lender offers this feature, you could be able to redraw on the extra repayments you’ve made over time, which can be handy if you need access to funds at short notice.
Is it better to make extra repayments or a lump sum payment?
The best solution of these two would depend on your personal situation. Whether you have some extra income that can be put towards your loan ongoing, or if you have received a bonus, tax return, or an inheritance.
We recommend you check if your mortgage allows you to make additional payments monthly or in a lump sum towards your principal. Regardless of the amount of funds applied towards the principal, paying extra installments towards your loan can make a large difference in the amount of interest paid over the life of the loan.
Additionally, the term of your mortgage can be significantly reduced by making extra payments or a lump sum. By making one extra payment per year you could shorten a 30-year mortgage by up to five years!
Are there any penalties for making extra repayments?
Here at loans.com.au , most of our variable products allow for extra repayments with no penalties.
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