How mortgage repayments work
Every repayment is part interest, part principal — and early on it is mostly interest. Understanding that split is the key to paying your loan off faster.
A mortgage repayment looks like a single number, but it is really two things bundled together: interest on what you still owe, and a chunk of the actual loan (principal). How that split shifts over time explains why paying a little extra early makes such a difference.
Principal and interest
Each period, the lender charges interest on your current balance. Your repayment covers that interest first, and whatever is left pays down the principal. Because your balance is highest at the start, early repayments are mostly interest. As the balance shrinks, more of each repayment goes to principal — so the loan pays off slowly at first, then accelerates.
Worked example
James borrows $600,000 over 30 years at 6%. His monthly repayment is about $3,597. In the first month, roughly $3,000 of that is interest and only ~$597 pays down the loan. Over the full 30 years he repays about $1.29 million — around $695,000 of it interest, more than the original loan.
Why fortnightly beats monthly
If you pay half the monthly amount every fortnight, you make 26 half-payments a year — the equivalent of 13 monthly payments, not 12. That extra month each year comes straight off the principal, shaving years off the loan and saving tens of thousands in interest, without you really noticing.
What the repayment does not include
The core repayment excludes fees, and it assumes a fixed rate. Real loans have variable rates that move, plus offset and redraw features that can cut interest further. Treat the calculated repayment as the baseline.
Calculate your repayments
See your repayment, total interest, and how much extra repayments could save.
This is general information, not personal advice. To model offset accounts and extra repayments in detail, see our mortgage payoff calculator and offset vs redraw guide.
Frequently asked questions
How are mortgage repayments split?
Each repayment covers the interest on your current balance first, and the rest reduces the principal. Early on the balance is high so most of the payment is interest; later, more goes to principal.
Is fortnightly really better than monthly?
Yes, if you pay half the monthly amount every fortnight. That makes 26 half-payments — equal to 13 monthly payments a year instead of 12 — so the extra goes to principal and you pay the loan off faster.
How much interest will I pay over the loan?
Often more than the amount you borrowed. On a $600,000 loan at 6% over 30 years, total interest is around $695,000 — which is why cutting the term with extra repayments saves so much.
Does the calculator include fees and offset?
No — it shows the core principal-and-interest repayment at a fixed rate. Fees, rate changes, redraw and offset accounts all affect the real cost, so use it as a close estimate.