Understanding Mortgage Repayments — A Complete Guide

Overview

Mortgage repayments typically follow an amortization schedule where each instalment includes an interest portion (charged on the current balance) and a principal portion (which reduces the balance). Early in the term, repayments are interest‑heavy; over time, the principal share grows as the balance declines. Understanding how rate, term, repayment frequency and features like offset/redraw change your total interest helps you choose a structure that fits your goals and cash‑flow. This guide explains amortization mechanics, compares P&I vs IO, shows how frequency and extra repayments shorten your loan, and links to a calculator so you can test scenarios and build a payoff plan.

Key concepts

• Principal & Interest (P&I): Standard loan where each payment reduces the balance.\
• Interest‑Only (IO): For a set period, you pay interest only; balance does not decline. Repayments jump when the loan switches to P&I.\
• Repayment frequency: Weekly/fortnightly/monthly changes the number of periods and can alter total interest slightly.\
• Rate & term: Higher rates or longer terms increase total interest materially.\
• Offset & extra repayments: Reduce effective balance and shorten the term.

Example drivers of total interest

• A 0.50% rate rise can add thousands to lifetime interest.\
• Switching from 30 to 25 years can cut interest substantially but raises repayments.

FAQs

Which repayment frequency is best?

Pick a frequency that aligns with income cycle. More frequent payments can reduce interest marginally.

IO or P&I?

IO lowers repayments initially but costs more overall. P&I steadily builds equity.

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Explore your scenario with the Mortgage Repayment Calculator.