Savvy’s calculator will show you how making extra repayments on your home loan can save you thousands in interest over the years
Knowing exactly how much interest you can save if you make extra repayments to your home loan can be incredibly motivating. Savvy’s extra repayment calculator will quickly and simply give you this information, so you can see first-hand how much your home loan’s additional repayments could save you in interest.
Enter your loan amount, interest rate and loan term and use the green box with an arrow to select the frequency you make your loan repayments – either weekly, fortnightly or monthly.
Next, enter in the additional contribution amount you can afford to pay on top of your standard loan repayment and enter after how many years you start to make these additional repayments.
Your results will be shown in both chart form and actual figures. You’ll be able to see the time you can shave off your loan and the interest savings you’ll make in the ‘view your results’ panel.
Savvy’s home loan additional repayment calculator will help you monitor your loan payment progress and keep you motivated to pay off your loan as quickly as possible.
Yes – when you take out a fixed rate home loan, you sign a contract with your lender which guarantees your lender a certain amount of interest. If you subsequently break this contract and either pay off your loan early, refinance to a lower interest rate loan or make additional repayments to reduce the size of your loan, your lender will lose that guaranteed interest.
If a lender does suffer a reduction in income (or a loss, if they’ve also borrowed the money at the expected interest rate), they’ll pass on this loss to you. That’s why early exit fees (also known as break fees or early repayment adjustment fees) are charged.
Such fees or penalties are based on the size of your loan, the original loan term remaining and the interest loss suffered as a result of you breaking your fixed term contract. In some cases, such early exit fees can amount to hundreds or even thousands of dollars.
You’ll pay less interest on your home loan if you make additional repayments, as you’ll gradually reduce the size of your loan. This, in turn, will reduce the interest you pay (because home loan interest is calculated daily, based on the amount of money borrowed)
Each additional repayment you make will mean you’ll shrink the size of your loan and therefore pay your loan off more quickly, potentially shaving years off your original loan term.
If you make additional repayments on your mortgage, not only will you reduce the amount of interest you pay overall, but you’ll also create a ‘buffer’ in case you suffer a financial setback such as redundancy or expensive house repairs. Getting ahead on your home loan repayments will reduce the financial stress of your mortgage.
Paying your home loan regularly and on time, plus making additional repayments, will illustrate to future lenders that you are a responsible borrower and may help to improve your credit rating. In turn, this will stand you in good stead when you need to refinance or apply for another loan.
If you have a redraw option on your variable rate loan and make regular additional loan repayments to get ahead, you could access your savings to help pay for home renovations, a new car, or other big-ticket items. This could be a cheaper option than taking out an expensive personal loan to pay for unbudgeted expenditure.
If you’re a property investor and have an interest-only loan which you claim as a tax deduction, you may reduce your tax deduction if you pay a lump sum off your loan, therefore reducing the wealth-building effectiveness of your investment property.
Features such as offset accounts can come with a price tag attached, so they may cost you more than a standard loan. This can come in the form of a higher interest rate (typically 0.1% higher on a variable rate loan to have an offset account added) or additional monthly fees (for example, a $10 monthly ongoing fee for a standard loan account).