Estimate your monthly home loan payment, total interest and total cost.
A repayment mortgage uses the standard amortisation formula. The payment is fixed; what changes over time is how it splits between interest and principal.
Borrowing 300,000 at 6% over 30 years:
The first payment is 1,500 interest and only 298.65 principal. It takes until roughly year 18 before more than half of each payment goes to the loan itself.
The formula above gives principal and interest. Your actual monthly outgoing includes several more items, often summarised as PITI:
These frequently add 30-50% to the headline payment. Budgeting on the principal-and-interest figure alone is the most common way buyers end up stretched.
| Deposit | Loan on 375,000 | Payment at 6%/30yr | Mortgage insurance |
|---|---|---|---|
| 5% | 356,250 | 2,136 | Usually required |
| 10% | 337,500 | 2,023 | Usually required |
| 20% | 300,000 | 1,799 | Not required |
| 25% | 281,250 | 1,686 | Not required; better rates |
Reaching 20% removes mortgage insurance entirely and typically unlocks a lower rate, so the saving is larger than the reduction in borrowing alone suggests.
| Term | Payment | Total interest |
|---|---|---|
| 15 years | 2,531.57 | 155,683 |
| 20 years | 2,149.29 | 215,830 |
| 25 years | 1,932.90 | 279,871 |
| 30 years | 1,798.65 | 347,514 |
300,000 at 6%. A 15-year term costs 733 more per month and saves 191,831 in interest. A useful middle path is to take the 30-year term for the flexibility of a lower required payment, then voluntarily overpay — you get the interest saving without being contractually locked into the higher amount.
Because interest accrues on the outstanding balance, overpayments are disproportionately effective early on. On the example loan, an extra 200 a month from the start clears it about 6 years early and saves roughly 100,000 in interest. A single extra payment each year has a similar effect.
Check whether your lender has early repayment charges — common on fixed-rate deals during the fixed period — and confirm that overpayments reduce the term rather than the monthly payment, since the former saves far more.
A fixed rate holds for a set period, giving certainty at a slightly higher initial cost. A variable or tracker rate moves with a benchmark, usually starting lower and carrying the risk of rising. The question worth asking is not which is cheaper today but whether you could still afford the payment if the rate rose by three percentage points — on 300,000 over 30 years, moving from 6% to 9% raises the payment from 1,799 to 2,414.
Affordability assessments typically cap housing costs at around 28% of gross income and total debt at 36%, though this varies by country and lender. Being approved for an amount is not a recommendation to borrow it: lenders assess your ability to service the debt, not whether doing so leaves you room for anything else.
Interest is charged on the outstanding balance, which is at its highest at the start. On a 300,000 loan at 6%, the first payment is 1,500 interest and under 300 principal. The crossover to majority-principal comes around year 18 of a 30-year term.
It costs far less in total but demands a much higher payment. Taking the 30-year term and overpaying voluntarily captures most of the interest saving while keeping the lower payment as a fallback if your income changes.
More than the reduced borrowing alone. Reaching 20% typically removes mortgage insurance and unlocks better rates, so the monthly saving is larger than the smaller loan would suggest.
No, it covers principal and interest only. Property tax, home insurance, any mortgage insurance, service charges and maintenance commonly add 30-50% to the real monthly cost.
The useful test is whether you could still afford the payment if rates rose three points. On 300,000 over 30 years, going from 6% to 9% takes the payment from 1,799 to 2,414. If that would be unmanageable, the certainty of a fix is worth paying for.