How to Calculate Your Monthly Mortgage Repayments

Your monthly mortgage repayment is the fixed amount you pay each month to cover both the interest and a portion of the loan principal, so that the loan is fully repaid by the end of the term.

It’s worth understanding how this figure is calculated because even a small change in your interest rate can make a noticeable difference over the life of a loan. The Reserve Bank of Australia sets the cash rate, which influences the interest rates lenders charge on home loans. As of late July 2026, the cash rate target is 4.35%.

The repayment formula

For a standard principal-and-interest home loan where the interest rate is fixed for the term, the monthly repayment is calculated as:

M = P × [ r(1 + r)^n ] / [ (1 + r)^n – 1 ]

Where:

• M is your monthly repayment
• P is the loan principal (amount borrowed)
• r is the monthly interest rate (annual rate ÷ 12)
• n is the total number of monthly payments (loan term in years × 12)

Worked example

Suppose you borrow $500,000 over 30 years with an annual interest rate of 5.00%.

1. Convert the annual rate to a monthly rate: r = 0.05 ÷ 12 = 0.0041667
2. Find the total number of payments: n = 30 × 12 = 360
3. Plug into the formula:
   M = 500,000 × [ 0.0041667 × (1.0041667)^360 ] / [ (1.0041667)^360 – 1 ]
4. After calculation you get approximately $2,684 per month.

How rate changes affect your repayment

Using the same loan amount and term, here’s how different rates change the monthly figure:

• At 4.50%: approximately $2,533
• At 5.00%: approximately $2,684
• At 5.50%: approximately $2,838

A 1% rise on a $500,000 loan over 30 years can add around $300 to your monthly repayment. Over the full loan term that adds up to tens of thousands of dollars in extra interest.

Try it yourself

HomeLoanAI’s interactive mortgage calculator lets you adjust the loan amount, interest rate and term to see how your repayments change. It’s a quick way to compare scenarios and get a feel for what you can comfortably afford.

Remember, the calculator gives you an estimate only. It doesn’t account for fees, interest rate changes over time, or your personal circumstances. It is not a loan offer or approval.

When you’re ready for the next step

If you’d like to move beyond estimates and talk through your options with a professional, you can request an optional handoff to a human broker. Any credit assistance is provided through Arrivau Pty Ltd under its Australian Credit Licence. HomeLoanAI itself doesn’t provide personal financial advice — all tools and information are general in nature, so they should be treated as a starting point, not a substitute for individual advice.