Understanding how your home loan repayments are calculated

You are required to make your contractual repayment to your home loan account each month by the due date. 

The way we calculate your home loan repayments depends on whether you’ve chosen principal and interest repayments, or interest only repayments.  

Principal and interest home loan repayments consists of paying back a portion of the loan amount borrowed (principal) and an interest component. The proportion of principal and interest you pay changes over the term of your loan. At the beginning of a home loan, a larger portion of each repayment goes towards paying off the interest. Over time, as your loan balance and interest decrease, more of each repayment goes toward the principal.

Your monthly principal and interest home loan repayment is calculated based on the: 

• loan amount
• loan term
• number of months remaining, and
• interest rate.

It’s also important to remember the following about repayments:

• For home loans with a BSB starting 182, repayments are calculated on the limit of your loan account, not the balance
• For home loans with a BSB starting 183, repayments are calculated on the balance of your loan account.

Interest only home loan repayments consist of paying back the interest on the balance, without reducing the principal. This means your repayments are lower compared to a principal and interest loan for the same loan amount, as you are not paying off any of the amount borrowed (principal). After the interest-only period ends, repayments will change, as you start to pay back both the principal and the interest over the remaining loan term. 

Some important things to remember:

• You will likely pay more interest over the loan term, compared to a loan that is principal and interest for the full term
• At the end of your interest only period, your new principal and interest repayment amount is calculated on the remaining term of the loan
• Your interest only repayments may vary each month, depending on interest rate, balance, and number of days in the month.

Your monthly interest only home loan repayment is calculated by adding the daily interest payable for each day of that month. Daily interest is calculated by: 

• taking the balance of the loan account, minus the balance of any linked offset accounts (for more information about offset accounts please see Home loan offset accounts) and
• multiplying this value by the daily interest rate. The daily interest rate is the applicable annual interest rate (as on that particular day) divided by 365. 

Your interest only repayments may vary each month, depending on interest rate, balance, and days in the month. 

As a result, the estimated repayment amount you see online may differ to the interest actually charged.