What is a home loan calculator, and how does it work?

Collage of hand comparing home loan calculator graphs.

How much does a home loan actually cost? Between the principal, deposit, fees, and interest, there’s a lot of expenses to consider. Not to mention it’s all spread out over decades, which can make it hard to comprehend how much you’re actually spending. 

This is where home loan calculators come in. Whether it’s estimating mortgage repayments or interest rate changes, a good calculator can be an invaluable tool during the comparison process. After all, if you know how to use them, they can help you discover which home loans offer good deals – and which just bury you in debt.

What does a home loan calculator do?

Collage of a man walking on a fractal of white squares shape like money notes on a green background.

A home loan calculator is a number-crunching tool that estimates how much your mortgage repayments could cost over time. By plugging in details like the term length, interest rate, and principal balance, you can see how different factors affect your overall home loan costs, and how changing them could save you money.

For example, Mozo’s Mortgage Repayments Calculator has a few basic features for showing home loan costs in action. 

  • Loan amount: This is the total amount of money you’re borrowing for your home loan. 
  • Interest (% p.a.): This is the annual interest rate. Keep in mind Mozo’s calculator assumes one interest rate for the entirety of your loan, so it doesn’t show you how changes in interest rates affect your repayments. (That’s what the Rate Change Calculator is for – more on that below).
  • Loan term (in years): This is the amount of time over which you repay your mortgage. Usually, home loan terms span from 20 - 30 years, but can go as high as 40 years

Changing any one of these numbers affects your overall home loan costs. If we plug in some numbers, we can see how it affects repayments in the tables below*.

If we change the loan amount…

Loan amount
Interest rate
Loan term
Monthly repayments
Total interest
Total cost
$500,0003.1% p.a.25 years$2,383$210,822$710,822
$750,000--$3,575$316,234$1,066,234

By adding $250,000 to the principal amount, we increase monthly repayments by $1,192 and the overall costs of the home loan by $355,412.

If we change the interest rate…

Loan amount
Interest rateLoan termMonthly repaymentsTotal interestTotal cost
$500,0003.1% p.a.25 years$2,383
$210,822
$710,822
-4.1% p.a.-$2,623$274,066$774,006

By changing the interest rate 1%, we add (or save) $240 on monthly repayments and $63,244 over the life of the loan. 

If we change the loan term…

Loan amountInterest rateLoan termMonthly repaymentsTotal interestTotal cost
$500,0003.1% p.a.25 years$2,383
$210,822$710,822
--30 years$2,379$342,782$842,782

By increasing the loan term, we save $4 on monthly repayments but balloon the overall cost of the home loan by $131,960.

*Keep in mind these are only estimates and don’t take into consideration factors like extra repayments, additional interest rate changes, or any other costs associated with a home loan like fees or stamp duty.

Mortgage Repayment Calculator

home with heart

Using the Advanced Tools

What if you want a more detailed picture of your home loan costs? It’s time to use the Advanced Tools. 

If you click on the “Advanced Tools” button on Mozo’s Mortgage Repayments Calculator, it’ll drop down to show you these new options:

  • Principal & interest vs. Interest only: This changes the type of payments you’ll be making on the home loan. Principal & interest (sometimes abbreviated P&I) tend to be the most common type of home loan on offer. Interest-only home loans can be a great option for investors hoping for tax breaks, since for the first few years you’ll only be repaying interest. However, they will often come with higher interest rates and don’t pay off any of your principal, which could put you in negative equity if the value of your property changes.
  • Repayment Frequency: You can change how often you make repayments, including monthly, weekly, or fortnightly. 
  • Introductory Rate (% p.a.): Some home loans come with an introductory interest rate for a set amount of time before rolling over to the standard interest rate. This lets you factor in how much interest you could be saving during that time period.
  • Introductory Term: Set the amount of time you’ll be on the introductory rate here. 
  • Upfront fee: Some lenders charge hefty upfront fees for their most competitive home loans. Plug in the charge here to see if it’s worth the money.
  • Ongoing fee: Lenders can charge ongoing fees, such as account keeping or maintenance fees, throughout the life of your home loan. Factor these in to see how they could affect your overall costs. 
  • Fee frequency: You can change how often you’re charged fees here. 

By filling in the above, you could get a more comprehensive overview of how much it costs to finance your home loan.

Screenshot of Mozo's mortgage repayment calculator tool.

Pros and cons of using a home loan calculator

Collage of a woman thinking about graphs and charts.

Like all tools, home loan calculators can be extremely useful but imperfect. Here are some of the pros and cons about what they can do. 

Pros

  • Great general cost-crunchers. Home loan calculators can accurately estimate your raw repayments and total interest over the life of a home loan, which can help you get some basic numbers for working out your budget and how much you can realistically afford before applying for a specific loan.
  • Adjustable. You can vary different factors to see how they affect your costs. This can show you how one home loan (or one version of a specific home loan) compares to another.
  • Free. Calculators like Mozo’s are free and unlimited, meaning you can use it at every stage of your home loan search. 

Cons

  • Might not show you the whole picture. Home loan calculators assume a specific interest rate throughout the life of the loan, so they may not show you how your repayments change due to circumstances like cash rate fluctuations, ending fixed terms, or even refinancing. 
  • Can’t factor in deposits or specific fees. Home loans will require you to pay a deposit (usually between 10-20%) so that you go into the mortgage with equity. Home loan calculators don’t factor in the deposit, nor other fees like discharge fees, which can give you a misleading picture of how much you need to have saved up going in.
  • Don’t show you how to save. Features like an offset account or free extra repayments can reduce the amount of interest you pay over the life of your loan, but unfortunately a calculator can’t reflect these cost-saving measures accurately.
  • Won’t affect the approval process. Just because you find an amazing loan with an amazing interest rate with the calculator, doesn’t mean you can automatically get it. The lender will perform their own calculations and assessments (called a serviceability test) to make sure your financial situation can handle taking on the debt before approving (or even pre-approving) your home loan.

Home loan rate change calculator

Calculator beside a rising and falling line of arrows. Orange background.

If you already have a mortgage or are looking to refinance, you might be curious to know how a change in your interest rate affects your repayments. That’s where Mozo’s Rate Change Calculator comes in.

Our newest home loan calculator lets you plug in the details of your loan and show you what happens if it’s slapped with a variable interest rate hike. Smaller rises in interest may not squeeze you too much now, but over time they can seriously add up. 

Unfortunately, variable rates have surged more than 1% in recent months thanks to the Reserve Bank of Australia. For a standard home loan, a change of that size can mean over $300 extra per month in repayments. 

Have a go with our new rate change calculator below to see how hikes could affect you.

Loan details

Rate change

Repayment change if rates go up

Looking for a home loan? Try out your new calculator skills by comparing competitive interest rates below.

Compare low interest home loans - last updated 11 August 2022

Search promoted home loans below or do a full Mozo database search . Advertiser disclosure
  • Unloan Variable

    Owner Occupier, Refinance Only

    interest rate
    comparison rate
    Initial monthly repayment
    3.14% p.a. variable
    3.06% p.a.

    For refinancers only. Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply in as little as 10 minutes.

    Details
  • Smart Booster Home Loan

    2 Year Discounted Variable Rate, Owner Occupier, Principal & Interest, <80% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    3.60% p.a.variable for 24 months and then 4.00% p.a. variable
    3.96% p.a.

    Already includes July RBA rate increase. New super low introductory rate home loan for two years. Min 20% deposit. No monthly or ongoing fees. Fast settlement times. Mozo award-winning online lender. Friendly, local Australian based team.

    Details
  • Celebrate Variable Home Loan

    <60% LVR, Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    3.79% p.a. variable
    3.79% p.a.

    Fast and efficient online application. Automatic discounts as loan is paid down. Free extra repayments and redraw facility. Zero fees. Min 40% deposit required.

    Details
  • PAYG Home Loan

    Owner Occupier, Principal & Interest, LVR<80%

    interest rate
    comparison rate
    Initial monthly repayment
    3.29% p.a. variable
    3.33% p.a.

    Low variable rate. Ideal for new home buyers or refinancers. Unlimited additional repayments. Unlimited free redraw. Application completely online. Optional 100% offset can be added for $120 p.a.. 20% deposit required.

    Details

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

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