How to Calculate Mortgage Percentage | Simple Guide

Understanding the key formulas

To estimate your mortgage repayments, it helps to understand the core components used in calculating how much you will pay in principal and interest over time. Even though lenders provide tools to do the math for you, knowing the basics helps you compare loan costs with confidence.

Core elements in mortgage calculations:

• Principal: The amount you borrow.

• Interest rate: The percentage charged by the lender, calculated over time.

• Number of payments: Total scheduled repayments for the full loan term.

• Repayment amount: A fixed payment that gradually shifts from mostly interest to mostly principal.

Why it matters:

• The effective rate (APR) gives the real cost because it includes most fees.

• Early repayments mostly cover interest, which is why comparing effective rates is crucial.

Doing these calculations manually can be complex. HeyNest brokers use advanced tools to calculate and compare real repayment percentages across lenders, ensuring accuracy and saving time.

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Factors that influence your percentage

The interest percentage you receive is shaped by both lender policies and your financial profile. Understanding these factors helps you secure better loan conditions. Key influences on your rate:

• Rate type: Fixed offers stability; variable changes with market conditions.

• Loan-to-Value ratio (LVR): Larger deposits reduce risk and may lower rates.

• Credit and income stability: Strong history and consistent earnings improve your offer.

• Loan term: Shorter terms cost more per payment but reduce overall interest.

Because the market shifts frequently, negotiating alone can be challenging. HeyNest connects you with a broker who tracks rate changes and secures competitive percentages tailored to your profile.

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Calculating and comparing loan options

Understanding your mortgage isn’t only about calculating one repayment, it’s about comparing multiple options to find the lowest effective cost over time. What to compare across lenders:

• Comparison rate: Reflects total loan cost by including fees and interest.

• Fee structure: Setup costs, ongoing fees and break charges impact the real rate.

• Repayment frequency: Paying more often can reduce the total interest paid.

• Offset accounts: Reduce the balance interest is calculated on, lowering your cost without changing the rate.

Comparing dozens of lenders and features is complex and time-consuming. HeyNest brokers do the heavy comparison work for you, providing clear, unbiased options that match your financial goals.

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Frequently asked questions

What is the difference between the interest rate and the comparison rate in Australia?

The interest rate is the base cost of borrowing; the comparison rate includes the interest rate plus most fees and charges, offering the true annual cost.

Does a 20% deposit guarantee a lower mortgage percentage?

While not guaranteed, a 20% deposit (80% LVR) or more significantly increases your chances of securing a lower rate, as it reduces the lender's risk and avoids LMI.

How often does my variable mortgage percentage change?

It can change at any time, usually following official cash rate movements by the RBA, or at the discretion of your specific lender.