How Mortgage Repayments Are Calculated

Borrow $600,000 over 30 years at 6% and your repayment lands around $3,597 a month — roughly $1.3 million over the loan, the house plus about $695,000 in interest.

Here's the machinery behind that monthly number: where each dollar goes, why the early years feel slow, and one scheduling trick that quietly shaves years off the loan.

Every repayment does two jobs at once. Part pays interest — the bank's fee for lending you the money, charged on whatever you still owe. The rest pays down principal, which is the actual loan itself. Only the principal part makes the debt smaller.

Think of a leaky bucket: interest is the leak, principal repayments are you pouring water out on purpose. The leak gets first dibs — only what's left over actually empties the bucket.

Interest is calculated on your remaining balance, and at the start that balance is enormous. On a fresh $600,000 loan at 6%, the first month's interest alone is about $3,000 — out of a $3,597 payment, only around $597 touches the actual loan.

But every dollar of principal you clear means slightly less interest next month, which frees up slightly more of the payment for principal, and so on. The snowball is real — it just only faces the right direction in the later years.

The repayment comes from amortisation — the maths of setting one fixed payment sized so your loan hits exactly zero on the last month of the term.

The amount never changes (on a fixed rate, anyway), but the mix inside it shifts every month. Early on it's mostly interest with a sliver of principal; by the final years it's flipped — mostly principal, with interest reduced to a rounding error.

Take your monthly repayment, halve it, and pay that amount fortnightly. There are 26 fortnights in a year, so 26 half-payments adds up to 13 full monthly payments — a whole extra payment smuggled in without noticing.

That extra payment goes straight at the principal, which shrinks the balance, which shrinks the interest. Over a 30-year loan, this one change can knock years off the term. Check your lender calculates it this way — some just divide the monthly amount by two-ish and quietly cancel the magic.

The whole game is getting the principal down early, while the interest bill is at its hungriest. Extra repayments, an offset account, a fortnightly schedule — they all attack the same weak point.

Before you sign anything, run your own numbers with a repayment calculator and look at the interest total in actual dollars, not a percentage. Rates vary and your numbers will differ, but the shape of the maths never changes: interest eats first, so starve it early.