Amortisation — how your repayments are structured

Each mortgage repayment is split between interest and principal. Early in the loan, most of each payment is interest; over time the proportion shifts toward principal as the outstanding balance falls. This is called amortisation.

Formula: Monthly repayment = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ − 1], where P is the principal, r is the monthly rate (annual rate ÷ 12), and n is the number of payments.

Offset account savings

An offset account reduces the loan balance used to calculate interest each period. If you have a $600,000 loan and $50,000 in an offset account, interest is charged on $550,000. This saves interest and can shave years off the loan term — without reducing your loan balance or locking away cash.

Example: On a $600,000 loan at 6% over 30 years, a $50,000 offset saves approximately $74,000 in interest and shortens the loan by about 3.5 years.

Monthly vs fortnightly repayments

Switching from monthly to fortnightly means you make 26 half-payments per year instead of 12 full payments — equivalent to 13 monthly payments annually. The extra payment each year accelerates principal reduction and saves significant interest.

Key metrics explained

• Repayment amount: The fixed amount due each period (principal + interest).
• Total interest: Cumulative interest paid over the full loan term.
• Total paid: Sum of all repayments (principal + interest).
• Offset saving: Interest avoided due to the offset balance.
• Years shaved: How much sooner the loan is repaid due to the offset.

Worked example

Loan: $750,000 at 6.2% p.a., 30-year term, $80,000 offset balance, monthly repayments.

• Monthly repayment: $4,580
• Without offset — total interest: $898,800
• With $80,000 offset — total interest: $811,500
• Interest saving: $87,300 | Years shaved: ~4.1 years

Calculations assume a fixed interest rate for the full term and constant repayment frequency. Actual repayments may vary with variable rates. Not financial advice.