Find out how long it will take you to repay your home loan using Savvy’s handy how long to repay calculator.
One of the most important aspects of a home loan is the term length – or how long you’ve got to repay your loan. It’s vitally important to understand how your loan term will determine the size of your repayments, and how much money you can save by paying it off earlier. Fortunately, Savvy makes this task easy using this how long to repay home loan calculator. You can make more informed home loan decisions by comparing offers and finding a competitive one that’s just right for you and your family.
It’s simple to use this home loan repayment calculator. You’ll only need to enter:
Once all of these have been inputted, the calculator will tell you how long it will take to pay off your loan. If you wish to change your repayment frequency from monthly to fortnightly or weekly, use the green arrow button to select a new payment frequency.
You can now play around with different repayment amounts and see clearly for yourself how increasing the size and frequency of your loan repayments will reduce the term of your loan, and ultimately save you money on interest payments.
Fortnightly repayments are cheaper than monthly instalments because there are 26 fortnights in a calendar year, but only 12 months. So, if you pay monthly, you’ll make 12 equal repayments off your loan. But if you pay fortnightly, you’ll make 26 payments, which equates to an ‘extra’ two payments a year or the equivalent of 13 months’ worth. This will result in your loan being paid off more quickly and interest declining more sharply, as home loan interest is calculated daily.
For example, if you enter in a $450,000 loan with an interest rate of 2.5% and repayment of $1,800 monthly, you’ll pay a total of $186,312.58 in interest, and the loan would be repaid in 29 years and 6 months.
However, if you keep the loan amount and interest rate the same, but change the repayment frequency to fortnightly and halve the repayments to $900, the interest you’ll pay drops to $163,755.70, resulting in a saving of $22,556.88 over the life of the loan. On top of this, your loan term will be reduced to 26 years and 6 fortnights.
For this reason, it’s always wise to make your loan repayments as frequently as possible, whilst still fitting in with your income or salary schedule. If you are paid weekly or fortnightly, it’s a good idea to pay your loan off weekly or fortnightly also.
Fixed rate loans
A fixed rate loan has a fixed interest rate, which is applicable to your loan for a fixed period (known as the term of your loan). Such loans offer the security of knowing exactly what your mortgage repayments will be well into the future, so you can plan your household budget more accurately.
Their main downside is that you are anchored to that loan for the fixed term, which is usually between one and five years, although some lenders do allow fixed rate loans up to ten years. If you want to take less time to repay your loan and refinance it, you may have to pay expensive early exit fees. Furthermore, fixed rate loans don’t tend to come with interest-saving features such as offset accounts and the option to make lump sum repayments, both of which can help you pay off your loan sooner.
Variable rate loans
Variable rate loans have an interest rate that changes largely according to announcements about the underlying Australian cash rate by the Reserve Bank of Australia (RBA). However, while lenders previously always responded to changes in the interest rate by the RBA, they’ve shown more independence in recent years to the point where most movement in interest rates is now determined by individual lenders.
The advantage of variable rate loans is their flexibility – you’re not tied into the loan for a set period and are free to refinance to a better loan without paying break fees. Variable rate loans also tend to come with many more interest-saving features which can enable you to pay your loan off faster and save on the interest you’ll pay overall.
Providing a larger deposit will mean you have to borrow a smaller sum to purchase your home, which increases your chances of being able to pay off your loan sooner.
In addition, offering a larger deposit will mean you could be eligible for the cheapest interest rates available on the market in Australia, which could also assist you to make larger loan repayments and pay off your loan faster.