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Your home loan repayment is determined by your loan amount, interest rate and loan term. Here is the exact calculation and what changes it.
By Jason Given · April 2026 · 4 min read
Your home loan repayment is determined by three variables: the loan amount (principal), the interest rate, and the loan term. Change any one of these and your repayment changes. Understanding which lever has the most impact helps you make better decisions about your loan structure.
The standard home loan repayment formula calculates the fixed monthly payment that pays off the loan exactly at the end of the term. The formula is: M = P x [r(1+r)^n] / [(1+r)^n - 1], where M is the monthly repayment, P is the loan amount, r is the monthly interest rate (annual rate / 12), and n is the total number of repayments (term in years x 12).
You do not need to calculate this yourself — Lendology's repayment calculator does it instantly. The formula is useful to understand because it explains why rate changes have such a large impact: the rate appears in both the numerator and denominator, compounding across every repayment over the life of the loan.
On a $600,000 loan over 30 years: at 5.5% the monthly repayment is $3,406. At 6% it is $3,597. At 6.5% it is $3,793. A 1% rate difference is $387 per month — $4,644 per year — over the life of the loan.
Extra repayments reduce your principal balance faster than the standard amortisation schedule. A lower principal means less interest accrues each day, which means more of each subsequent repayment goes toward principal. The effect compounds over time — even a modest extra repayment early in the loan can shave years off the term.
On a $500,000 loan at 6%, paying an extra $500 per month from day one reduces the 30-year term to approximately 23 years and saves approximately $120,000 in total interest.
On a fixed rate loan, your repayment stays the same for the fixed period regardless of rate movements. On a variable rate loan, your repayment adjusts when the interest rate changes — either up or down. A rate rise increases your repayment; a rate cut reduces it.
At 6% interest over 30 years, the monthly repayment on a $500,000 loan is approximately $2,998. At 6.5% it is approximately $3,160. Use Lendology's repayment calculator for your specific rate and term.
At 6% interest over 30 years, the monthly repayment on a $600,000 loan is approximately $3,597. At 6.5% it is approximately $3,793.
Yes in total interest, but no in monthly repayments. A 25-year term has higher monthly repayments than a 30-year term but saves significantly in total interest paid. The right term depends on your cash flow and goals.
Fortnightly repayments are half the monthly amount, paid every two weeks. Because there are 26 fortnights in a year, you make the equivalent of 13 monthly payments instead of 12. This reduces your balance faster and saves interest over the life of the loan.