Home loan repayments - how much can I afford to repay?

If you’re thinking about purchasing a property, before you start eyeing off that penthouse suite the first thing you should think about is how much you can realistically afford to repay each month, as this will ultimately determine the amount you should borrow.

Home Loan Comparison Table - rates updated daily

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    Mozo Experts Choice 2021
    Smart Booster Home Loan

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

    interest rate
    comparison rate
    Initial monthly repayment
    1.99% p.a.variable for 12 months and then 2.48% p.a. variable
    2.47% p.a.

    A super low introductory rate home loan with no monthly or ongoing fees. Unlimited free redraws and unlimited additional repayments to help you build your equity and own your home sooner. Multiple loan splits available. (Rates revert after introductory period ends). 20% minimum deposit required. Winner of two Mozo Expert's Choice Award for 2021.

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    UHomeLoan

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.75% p.a.
    fixed 3 years
    2.22% p.a.

    $0 fees and easy application. Choose between weekly, fortnightly or monthly repayments. 3 year fixed rates are for new Owner Occupier Principal & Interest loans.

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    Details
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    Basic Home Loan

    Fixed, Owner Occupier, Principal & Interest, LVR<70%

    interest rate
    comparison rate
    Initial monthly repayment
    2.09% p.a.
    fixed 3 years
    2.43% p.a.

    Get a flexible loan structure with up to six loan accounts with different rate types. Make free extra repayments. Enjoy free redraw facility. No upfront or ongoing fees. Option to earn Qantas points.

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    Mozo Experts Choice 2021
    Celebrate Variable Home Loan

    <60% LVR, Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    2.19% p.a. variable
    2.19% p.a.

    Fast and efficient online application. Automatic discounts as loan is paid off. Free extra repayments and redraw facility. Zero fees to consider. Min 40% deposit required. Winner of three Mozo Expert's Choice Award for 2021.

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  • Hot Deal$3,000 cashback when you refinance with Virgin Money (T&Cs apply)
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    Special Offer Reward Me Fixed Rate Home Loan

    Owner Occupier, LVR <80%, 300k+

    interest rate
    comparison rate
    Initial monthly repayment
    1.94% p.a.
    fixed 2 years
    2.77% p.a.

    Enjoy $3,000 cashback when you refinance with Virgin Money (T&Cs apply). Additional repayments up to $10,000 per annum. Reverts to the discounted variable rate on expiry of the fixed term.

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Home loan repayments calculator

To help you figure out what kind of home loan repayments are within your budget, start by punching in your numbers into our home loan repayments calculator.

Loan amount

You can enter in different loan amounts to get an idea of how your home loan repayments could change, depending on the amount you are looking at borrowing. Just take a look at the table below to see how the repayments may differ on a mortgage with a 5% interest rate over 25 years:

Loan amount Monthly repayments

$300,000

$1,754

$400,000

$2,338

$500,000

$2,923

$600,000

$3,508

$700,000

$4,092

$800,000

$4,677

$900,000

$5,261

$1,000,000

$5,846

Interest rate

Of course, the home loan amount isn’t the only factor when it comes to your ongoing repayments, as the interest rate could make a significant difference to your monthly repayment amount.

Scenario: Amanda is looking to take out a $600,000 home loan, meaning with a 5% interest rate her monthly repayments will be $3,508. But if Amanda was savvy and hunted down a mortgage with a low 4% interest rate, her ongoing repayments would drop to $3,167.

When choosing a mortgage you’ll have the choice of either a fixed or variable option, which can also affect your mortgage repayments. Here are some of the pros and cons of each to help you decide between the two:

Fixed rate

pros: Your interest rate will be locked in for an introductory period of usually between 5-7 years, meaning your repayments will stay the same over this period.

cons: The rate you’ll receive will generally be higher than with a variable rate loan and if you try to switch providers before the fixed rate period comes to an end you may be charged a pricey break cost fee.

Compare fixed rate home loans

Variable rate

pros: You’re not only likely to receive a lower interest with a variable rate loan but more flexible features too like an 100% offset account, fee free extra repayments and redraw facility.

cons: Your interest rate will change according to the market, so you risk your rate increasing if your lender decides to lift their variable rates.

Compare variable rate home loans

Home loan term

Another way to bring down your monthly repayment amount is to increase the term of the home loan.

Example: If Amanda is on a tight budget she could ask the provider if she could extend the loan term from 25 years to 30 years. Our repayments calculator shows this would reduce her monthly repayments from $3,167 to $2,864.

Later down the track, Amanda can always make extra repayments to reduce the life of the loan and the interest she pays.

Example: 5 years after taking out the mortgage, Amanda receives a work promotion and uses her extra repayments facility to put an extra $400 towards her home loan each month. This will reduce the life of her loan by 5 years and 1 month and she will save $74,239 in interest.

Repayment frequency

You should also think about how often you want to repay your loan e.g weekly, fortnightly or monthly. Remember not all home loans come with the flexibility to choose your repayment frequency, so make sure you add this to your home loan shopping list.

It’s a good idea to set up your repayments fortnightly rather than monthly as this will ultimately mean you’ll pay off an extra month at the end of the year. Say your monthly repayments are $2,000, over a year you will have paid back $24,000 but by setting up your mortgage repayments over 26 fortnights at the end of the year you will have paid $26,000.

Rate rise

As mentioned if you decide to sign up with a variable interest rate, there is a chance of a rate rise if the Reserve Bank of Australia decides to increase the official cash rate and your lender in turn lifts their variable rates as well, or your bank decides to increase their rates without the RBA.

So have a play with our rate change calculator to get an idea of what you’ll need to budget for if the market or your bank changes.

For instance, the below table shows if Amanda’s 4% rate lifted by 0.75% this would make her monthly repayments jump up from $2,864 to $3,130.

Scenario 1

Rate rise Monthly repayments

4%

$2,864

4.25%

$2,952

4.50%

$3,040

4.75%

$3,130

In the worst case scenario, the next table shows if Amanda had originally signed up with the higher 5% rate loan and had chosen the 25 year term her repayments would have jumped up from $3,508 to $3,775.

Scenario 2

Rate rise Monthly repayments

5%

$3,508

5.25%

$3,595

5.50%

$3,685

5.65%

$3,775

Interest only home loans

Another option that will really bring down your monthly repayments is opting for an interest only loan, which as the name suggests means you are only repaying the interest charged on the loan. Using scenario 1 of a 4% rate over 30 years, this would bring Amanda’s monthly repayments down to just $2,000 during the interest only period (usually 5 years). However, she will have to start paying off both the interest and principal after the interest only period comes to an, so Amanda will need to ensure she can afford the regular repayments after this period before she takes out the loan.

As you can see there are many factors that can influence your ongoing repayments, with Amanda facing anywhere between an ongoing repayment of $2,000 up to $3,775 with the same loan amount of $600,000 for each scenario. So always make sure you weigh up your options by having a play with our home loan repayments calculator to ensure you can comfortably afford your ongoing repayments over the entire life of the loan.

Tips for managing your mortgage repayments

  • Take out mortgage protection: A good way of protecting yourself if an unforeseen event like an illness, injury, redundancy or divorce occurs is by taking out mortgage protection insurance, which will cover your home loan repayments for a set period of time.
  • Offset account: It’s also wise to start setting aside money in an offset account attached to your mortgage. Not only will you reduce the amount of interest you pay through the offset facility but the money is easily accessible just like with an everyday bank account.
  • Extra repayments: An alternative option to an offset account is putting any extra cash you have towards making extra repayments, which will mean when you run into a rough patch you’ll already be ahead on your repayments.
  • Repayment holiday: If a time comes when you need a break from your mortgage repayments, due to events like job redundancy or maternity leave a repayment holiday may be the answer. But keep in mind, your lender may require you to have made extra repayments on your loan to be eligible for this option and you’ll also be charged interest over this period, so it should only be used as a short term solution.

*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.

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