How much can I expect to pay for my mortgage repayments?

How much can I expect to pay for my mortgage repayments?

The Aussie dream of owning their own house is alive and well, with a huge number of people buying property with a mortgage. According to Mozo, of the 10.3 million properties in the country, 6 million have mortgages against them.

How much is repayment on mortgage? As of April 2022, the average initial monthly repayment on a $400,000 mortgage in a 30-year period is $1,693.

With all your personal financial circumstances accounted for, it may be tricky to know exactly what to expect on your mortgage repayments when you get a home loan.

How much is the repayment on a mortgage? Let’s calculate

A mortgage is a loan taken out against your house, apartment or other property. The lender (usually a bank but there are many types of lenders available these days) gives you the money to buy the property, and then you agree to pay them back over time. For most Aussies, this is their biggest monthly expense.

This is why it is crucial for you to know ahead of time whether or not you can afford that dream property, and if you’ll be able to stay on top of your repayments each month for the next 30 years. The good news is that a mortgage broker can help you understand your potential repayments, and your borrowing power, from your first appointment.

So, how do you calculate your mortgage repayment? Here are the top factors banks use to calculate repayment amounts on your mortgage.

Principal / Amount borrowed

Principal is the loan amount or total amount of money you borrow from the lender. This includes the cost of the house as well as any fees related to setting up your home loans or lenders mortgage insurance (LMI).

Deposit

A deposit is a percentage amount of the property purchase price. It shows the seller you are committed to purchasing, and it shows the lender your ability to save and manage your money. The deposit is paid to the seller as part of the sale contract and the remaining amount owed makes up for home loan with the lender. The deposit is one of the biggest factors when calculating your mortgage repayment as it determines the kind of loan you are eligible for, amount you can borrow or your principal, and sometimes even the interest rate available to you for your loan.

Ultimately, the size of your deposit will tell you how much you need to borrow to buy your property and that factors into your mortgage repayment amount. The bigger your deposit, the less you will have to borrow and the lower mortgage repayment you will have to pay each month.

Interest rate

The interest rate is the amount of money that your lender charges you per year for borrowing money. This can vary depending on the type of loan you are taking out. If you have a fixed-rate mortgage, then the interest rate remains constant throughout the fixed term (usually between 1-5 years at a time) and you can continue to have fixed terms for life of the loan, but you must renew them each time.

However, if you have a variable-rate mortgage, then this changes each time the interest rate is changed by the lender – either up or down – and will change your repayment amount each time.

Repayment frequency

Your initial loan repayment is usually set up as a monthly payment. However, the more frequently you make repayments, the more you’ll save in interest over the life of your mortgage. Interest is calculated daily, so if you pay off your loan early, you could end up paying less in interest than if you paid off your loan late.

There are many repayment schedule options available and a professional mortgage broker can help you understand which is right for you and help you set it up with your lender.

Repayment type

There are various types of repayment plans like principal and interest repayments and interest-only repayments. With the former, you will pay a bigger amount because you are paying both for the principal and the interest portion of the loan. This actually lowers your overall loan costs.

With the latter, your repayment amount is lower because you’re only paying the interest — but this makes the overall cost of the loan bigger because you’re paying more slowly, and interest rates can fluctuate based on multiple factors.

Length of loan

The term length refers to how long you plan on paying back your loan. A shorter term means that you pay off the loan faster but at a higher cost. On the other hand, a longer term means that you pay less monthly payments but pay off the loan slower.

Fees

There is a range of fees that come with buying property in Australia. These include LMI, stamp duty, conveyancing costs, legal costs, valuation costs, and other miscellaneous costs. Some of these fees can be included in your home loan with your lender and therefore part of your monthly repayment. Others will need to be paid upfront as part of your sales contract. By working with a mortgage broker, you will never pay for our services (because we are paid by the lender and this is not passed on to you) and we can advise you on what different fees you will have depending on loan type, lender and your deposit amount.

How much will my mortgage repayment be? Professional Lending Solutions can help.

Working out a mortgage repayment plan that best suits your capabilities and circumstances can take a lot of paperwork, time, resources, and energy. For this, you may want to consider getting advice from a licensed professional.

At Professional Lending Solutions, we will explain all your available finance options and answer any questions you may have in terms that are simple and easy to understand. We can also help crunch your numbers for you!

Reach out to us on Ph: 0421 934 033 or Ph: 07 5597 6049.

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