Mortgage Calculator: How do I calculate my mortgage repayments?

Use this Mortgage Calculator to see what your mortgage repayments will be

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Ed McKnight

Economist, property investor and host of the Property Academy Podcast
Mortgage Calculator

Mortgage Calculator and Loan Repayment Calculator

The mortgage is the most significant expense in any investment property. While many investors will use an interest-only mortgage – where the principal doesn't go down – others will use a standard principal and interest mortgage.

Search online and there are a bunch of calculators you can use to help give you an idea of what your repayments on your mortgage would be.

Most of these calculators are for a standard (table) principal and interest mortgage – and it’s what we are covering in this article too.

In this article you’ll have access to our mortgage calculator, and learn how to interpret your calculations in terms of getting your mortgage.

Check out our interest-only mortgage calculator if you're an investor wanting to jiggle some figures on what your repayments would be using an interest-only mortgage.

 
Mortgage Calculator Comparison

Opes Mortgage Calculator vs Sorted.org.nz vs ANZ vs Westpac vs ASB vs BNZ – Which Mortgage Calculator Should I Use?

It seems every finance website comes with its own mortgage calculator (us too). Google “mortgage calculator” and you’ll see for yourself.

But they aren’t all the same – even though it seems like they are.

Sometimes subtle differences can mean that one is more user friendly than others. So because we went through them and had a play with each, here is our honest opinion on most of the main mortgage calculators in New Zealand.

ANZ Mortgage Calculator

This is the easiest to use out of the main banks, and has a good mix of function and information.

For instance, it only requires inputting information into 3 fields, but it has the ability to see what you could save in interest if you made extra repayments.

ANZ mortgage calculator

It also pulls through current interest rates (instead of you having to search for them) and can break down the amount that goes to P+I loans.

However, it could be criticised as being a bit basic. It’s based on a standard table mortgage and doesn’t have the ability to calculate more advanced scenarios, for example if you are splitting your mortgage across multiple interest rates.

BNZ Mortgage Calculator

This one we found to be the quickest to get started, but it has some issues that you need to be aware of.

Like the ANZ calculator, this calculator is able to show you what you could save in interest if you made extra repayments and pulls through current interest rates.

And the results update automatically, which means you can instantly see the financial impact as you are playing around with the numbers. So we do think this one has one up on ANZ.

But again, the function is pretty basic. You can’t create a more complicated mortgage structure with different tranches, or create different scenarios.

And you can’t create a more custom mortgage term; you can only set the mortgage term to 5-year increments for anything more than a 5-year term.

Sorted.org.nz Mortgage Calculator

The Sorted.org.nz mortgage calculator has a nice design and is arguably the best looking.

On top of this you can create 3 different mortgage scenarios to compare the differences.

However, there are a few issues with their default assumptions.

The default interest rate is set at 6%, which we argue is too high for the average user, given where current interest rates are.

The mortgage term is not capped at 30 years (the maximum term in New Zealand). This means a borrower who has never had a mortgage before might think they could extend the term out to 40 years or more to bring their mortgage repayments down.

That is unrealistic. So, it is well designed, but watch out for user error in this one.

ASB Mortgage Calculator

The ASB Mortgage calculator is the best one for serious borrowers, especially those with more complex mortgage structures.

For instance, you can split your loan into 4 segments with different interest rates and terms. Across these segments you are also able to see the average interest rates and total repayments.

We like this feature because some investors and homeowners like to split out their loans into different tranches.

However, because it can offer more complex scenarios this runs the risk of it getting complicated – fast. This can be a barrier for first home buyers or investors who are just getting started.

Westpac Mortgage Calculator

Westpac’s mortgage calculator is by far the best designed, but is the least user friendly.

By this we mean you can create 2 scenarios but you are forced to put in a deposit of at least $1.

This is a problem for some investors who may not have a deposit, and are instead looking for 100% finance for an investment property.

There are also some issues with the assumptions. Like Sorted, it doesn’t cap out the loan term at 30 years. This can lead to uninformed borrowers getting the wrong idea about what’s realistic.

It also doesn’t have a weekly repayment amount. Yes, you can do the math yourself, but some investors might prefer to have that information readily available.

Other Calculators You Can Use

As well as calculating your mortgage repayments, if you’re making a property purchase you may also like to run a couple of other numbers.

Use our capital growth calculator to see what your capital gains might be.

To see the financial picture of your investment, you can use our property investment calculator.

You may also want to see whether the property will earn you money each week, or require additional investment to keep going. Use our rental yield calculator to run these numbers.

If you want to run the numbers using another method, Opes has a full range of other calculators that you can find and use.

How It Works

How the Mortgage Calculator Works

This mortgage calculator works out your repayments as if it is a standard table mortgage.

This is where your entire home loan is on the same interest rate (which isn’t always the case).

It uses an amortisation table (hence why it’s called a table mortgage) to work out how much you have to repay each week, fortnight or month.

This is just a fancy way of saying “how much do I have to pay each week to completely pay off my mortgage in X years”.

And the key feature of a table mortgage is that you make the exact same payment for the length of the loan (as long as the interest rate doesn’t change).

mortgage calculator

Say you took out a $500,000 mortgage at 4% over 30 years and paid the mortgage weekly, you would pay $550.50 every single week for those 30 years.

It should be said that in actual fact, your interest rate will move and your mortgage repayments will change every few years depending on how long you fix your interest rates for.

As your interest rates change, your repayments will be recalculated.

How to Use the Mortgage Calculator

How to Use the Mortgage Calculator

Four factors are used to calculate the size of your mortgage repayments:

  • The amount of the lending you take out, e.g. $500,000
  • The length of your loan, e.g. 30 years
  • The frequency you make a payment, e.g. weekly

You can play around with each of these factors in the mortgage calculator and see the effect that would have on your mortgage repayments, and the total amount of interest you would pay over the life of the home loan.

While you’re using the mortgage calculator bear in mind that as well as using the slide bars to select your interest rate and mortgage term you can also type in the exact term or interest rate on the right-hand side.

This will give you a more accurate repayment amount.

Mortgage calculator nz

What Interest Rates Should I Use In The Mortgage Calculator?

Interest rates fluctuate up and down, depending on the market and the bank you choose to go with.

At the time of writing (mid-June 2022), interest rates see ANZ, BNZ, Kiwibank, ASB and Westpac’s 1-year term at 4.85%.

The Cooperative and HSBC are slightly lower at 4.34% and 4.69% respectively.

For non-banks, Resimac is the only one offering a 1-year fixed term, which is 5.6%.

Peppermoney and Liberty are offering the lowest floating rates at 4.49% and 4.84%.

To see what interest rates are by the main lenders in New Zealand visit: mortgages.co.nz.

And if you want to see where we predict interest rates are going, see our interest rate forecast here.

What Term Should I Use In The Mortgage Calculator?

The other relevant factor is the length of the mortgage – known as the mortgage term.

This represents the number of years it takes to pay back the mortgage.

In New Zealand the maximum term that most banks lend for is 30 years. So if you are applying for a mortgage for the first time, using a 30-year term is a good start.

A 25 to 30-year mortgage is fairly standard in other countries like the UK and the United States. But there are countries that offer longer terms, for example Finland offers 60-year mortgages.

And some countries like Japan and Switzerland offer multigenerational, 100-year mortgages.

But, if you can afford higher repayments and want to pay your mortgage back more quickly, you can also shorten this down.

A shorter mortgage term not only means becoming mortgage free earlier, it also means paying less interest over time.

Should I Pay Weekly, Fortnightly Or Monthly?

Some people may think that paying weekly or fortnightly saves on interest costs. But this isn’t really true. The difference is insignificant.

The reason some people think paying fortnightly or monthly pays off the mortgage quicker is they think: “The fortnightly payment will be half the monthly payment, but there are 26 fortnights in a year, and 12 months.”

So, they think they make an extra 2 repayments per year if mortgages are paid fortnightly.

It just doesn’t work like this in real life. This is because the repayments are adjusted, and the monthly repayment is based on 4.33 weeks per month, not 4.

Think about it another way – people who get paid monthly don’t get paid less than people paid fortnightly.

So setting the frequency of your mortgage repayment often depends on convenience.

If you get paid weekly, then making weekly mortgage payments probably makes sense for your budget. If you get paid monthly, it probably makes sense to pay the mortgage on a monthly basis.

Interpreting your results

Interpreting the Mortgage Calculator Results

As you play around with the mortgage calculator, you will notice five results:

  • Your repayment amount
  • The total value of your repayments
  • Total value of your interest costs
  • Your principal payments as a percentage
  • Your interest payments as a percentage

Repayment Amount

Your mortgage repayment, whether it be weekly, fortnightly or monthly, is probably what you are most interested in. It is also the most self-explanatory. It’s the amount that you’re going to pay each period.

If you borrow $500,000 from the bank at 4% interest over 30 years and make a weekly repayment, you will pay the bank $550.50 per week.

Mortgage calculator nz

Total Value of Your Repayments

The total value of your repayments is the total amount you will pay to the bank over the term of your mortgage.

Using the same figures as above ($500K home loan, 4% interest, 30-year term, weekly repayment), you will make total mortgage repayments to the bank of $858,778.

You can also calculate this by taking your weekly repayment ($550.50) and multiply it by 52 to get your annual repayment ($28,626) and then multiply it by 30 to get your total mortgage repayment.

Just be aware that this mortgage calculator uses some rounding, so it may be a few dollars off, depending on the figures you use.

Interest Cost

Interest is one of the most expensive purchases you will ever make in your life – especially after you calculate your total interest payments using a mortgage calculator.

Using the figures from above, you would pay $358,778 to the bank in interest over the 30-year period of the loan, which is 71.8% of the value of your initial mortgage.

mortgage calculator

Principal Payments and Interest Payments (%)

The last two results calculate where your total repayments go.

If your total mortgage repayments were $858,778, and you paid $358,778 in interest, then you paid back $500,000 in principal payments i.e. the whole mortgage.

This means of your total repayments, 58.2% went towards paying down the principal and 41.8% went to paying interest costs.

How Do I Get A Mortgage?

How Do I Get A Mortgage?

Let’s get to it, you’ve found a property you like and unless you have a million something dollars in your bank – you’ll need a mortgage.

The three main mortgage types are:

  • Table Mortgage (standard principal and interest mortgage)
  • Interest-Only Mortgages
  • Revolving Credits

Check out our Epic Guide to Mortgages to dive into the ins and outs of each of these types. But for the purpose of this article, we are mostly talking about table mortgages – is the standard, principal and interest loan that most home-owners go for, initially.

You can apply for lending through either a main bank (e.g. ASB, Westpac etc.), or a non-bank (e.g. Resimac, Avanti or many others).

And while you can apply for a mortgage directly through a lender, anecdotally we know about 50% of new borrowers use a mortgage broker.

Why? Because mortgage brokers stay up to date with each bank's lending policies, and they will determine which lender is most likely to give you a loan.

They will then approach these specific banks first.

They will also look to present your finances in a way which is most likely to get you approved. Or, if they believe you're unlikely to get approved yet, will work with you to get your finances in shape until you're ready to go.

For more information on what brokers can do for you, check out our list of the Top 10 Mortgage Brokers in New Zealand.

How Much Can I Borrow?

How Much Can I Borrow?

Now, you might have used the mortgage calculator above, seen the repayments you would need to make, and think: “Yup, I can afford that”.

But, the thing is the bank might not agree with you and your mortgage might not be approved.

Why’s that? If you can afford the repayments, surely a bank will lend you the money?

The thing is banks are super paranoid about lending a whole stack of cash to someone who isn’t going to be able to afford it.

So, they have measures in place to test:

  • - You can service the mortgage
  • - You have a satisfactory amount of deposit

Here are a few things to consider when working out how much money you can lend for your mortgage.

Deposit

First things first, the deposit you need to get a mortgage is not always the same amount for all borrowers.

Some Kiwis can now get mortgages with just a 5% deposit; others will need 40% or higher.

The Loan to Value Ratio restrictions were introduced by the Reserve Bank (the bank that sets the rules for NZ banks) in 2013. These are temporary measures that regulate how much banks can lend against a property.

Here are the current LVR restrictions:

  • Owner-occupiers require a 20% deposit to purchase an existing property
  • Property investors, on the other hand, require a 40% deposit when purchasing an existing property.

It’s important to note not all lending needs to come under these restrictions. The banks still have the discretion to lend money to some borrowers with lower deposits.

And it’s worth noting that banks are often a bit more strict with investors than owner-occupiers.

For instance, only 90% of the bank’s lending needs for owner-occupiers needs to come within the LVR restrictions. That means about 1 in 10 loans can be given out to borrowers with a lower deposit (say 10%).

But for investors it’s 95%.

 

The Updated CCCFA (Credit Contracts and Consumer Finance Act)

Ask any mortgage broker and they’ll tell you it’s harder than ever to get a mortgage approved right now.

Changes to the CCCFA and the Responsible Lending Code came in December 2021, which tightened the rules banks must use when considering those fit for a mortgage.

The updated Credit Contracts and Consumer Finance Act (CCCFA) is a law that makes sure people who lend money act responsibly.

That means banks and pay-day lenders aren’t lending people money that they can’t afford to pay back.

Some mortgage brokers will go so far as to describe the changes as “extreme” or having gone way beyond a reasonable level.

It’s all to do with how the bank looks at your expenses when assessing your application.

Instead of taking discretionary spending as just that – something you would trim back on should you need to – it locks it into your spending budget.

Long story short, people are being rejected for mortgage applications for Kmart splurges, and Coke purchases at the dairy.

 

Servicing / Uncommitted Monthly Income (UMI)

To approve your mortgage, the bank needs to work out how much money you have left over from your pay check … after you’ve paid out everything else.

These are things like living expenses, insurance, hire purchase, and childcare.

Ultimately, they want to know: How much money do you have sitting left over in the bank that can service a new mortgage.

Most banks use UMI, or Uncommitted Monthly income, to measure this.

In a nutshell, if the bank determines you don’t have enough UMI, you will be declined your loan application.

On top of this banks will also test that you could still pay your mortgage at a higher interest rate. This is called the servicing test rate. This varies between banks, but is usually about 2.5 - 3.5% above the current 1-year fixed rate, based on our experience.

 

Debt-To-Income Ratios – DTI

Debt-To-Income ratios (DTIs) are a way for banks to cap the amount of money you can borrow, using your current annual income as a baseline.

For example, in the past BNZ has implemented a DTI of 6x annual income.

So, if your household earns a combined income of $150,000, multiply that by 6, and that is the maximum amount you could borrow under this test through BNZ.

Essentially, it’s a tool to ensure investors and home buyers don’t take on too much debt.

For investors, the calculation gets a bit harder. That’s because you also include a percentage of the rent your investment properties earn.

This dual figure will then be subject to the DTI amount.

For example, the bank will calculate your household income by taking the annual income salary, adding it together with a portion of your rent, and then multiplying that figure by 6.

But not all banks have a set DTI, and the Reserve Bank has said it will not make them mandatory for the moment.

 

Account Conduct

As well as all this number crunching, the bank also wants to see that you are good with money.

That’s because if they’re going to lend you a significant amount of money, they want to have the confidence that you’re going to make your repayments.

These sorts of red flags include if your bank account has gone into unarranged overdraft or if you are making cash transfers from your credit card to your cheque account.

In the bank’s eyes, it thinks: “How can I approve a mortgage if the borrower can’t afford their current financial obligations?”

Next steps

What Are The Differences Between Banks, and between Banks And Non-Banks?

Banks (or main banks) are financial institutions regulated by the Reserve Bank of New Zealand.

Here are the big five lenders in NZ:

  • ANZ
  • ASB
  • BNZ
  • Kiwibank
  • Westpac

Every bank is different. Each has its own lending policies and criteria, which means it’s completely normal for one bank to approve your lending, while another will not.

For example, ANZ will not take into account income earned from overtime but Westpac will, so nurses applying for a mortgage are generally more suited to Westpac.

Similarly, BNZ has policies more favourable for women on maternity leave who are about to return to work.

That’s not to say that every nurse needs to work with Westpac, or expectant mothers should only head into BNZ, but it is worth accessing this kind of insider knowledge through a mortgage broker.

Banks vs Non-Banks

Non-banks are businesses that provide home loans to borrowers who might not get approved by a bank.

Here are some of the most commonly heard names in the business:

  • Resimac
  • Peppermoney
  • Liberty
  • Squirrel Money
  • Basecorp

Like banks, they also face regulation from the Reserve Bank, but the regulation is lighter. That means these lending institutions will often introduce products that suit different types of people.

 

Resimac, for instance, has two products – the 80/80 loan and the 20-year interest only loan – which are beneficial for property investors.

In the past, non-banks may have been perceived as “dodgy” or “second-rate.” However, as banks start to tighten their mortgage criteria, non-banks are starting to shine as an alternative. They are legal, regulated and run by finance experts.

So, if you’ve recently been declined a mortgage and are contemplating turning to a non-bank, this article will break down our picks for the top 5 non-bank lenders in the country.

It’s still a good idea to discuss these options with your mortgage broker.

 

Take a read of our article here, which goes into more detail on what each of these non-banks offer.

What To Do After?

What to Do After You've Used the Mortgage Calculator?

OK, you’ve used the mortgage calculator and are comfortable with your repayments. How do you go about actually getting a mortgage?

Your next step is to use a mortgage broker to negotiate with different banks to secure your mortgage.

Sure, you can approach banks directly and negotiate yourself. But, there are a whole heap of benefits to using a mortgage broker.

FAQs

Frequently Asked Questions About Mortgages

How much does my salary need to be for a mortgage?

One of the criteria you need to satisfy to have a mortgage approved is whether you have enough money to afford the repayments on the mortgage. This is called 'servicing'.

The salary you need to service your mortgage will depend on the size of the mortgage and what the current interest rate is. The higher your mortgage the higher your salary needs to be.

In addition to this, the banks use a 'servicing test rate' which assesses whether you can afford your mortgage at a higher interest rate while making principal and interest repayments.

How much is my mortgage on a 500k house?

If you recently purchased a property for $500,000 and put a 20% deposit towards it, that would result in a mortgage of $400,000. If you had a fixed interest rate of 4%, your monthly mortgage repayments on a 30-year mortgage would be $1,910.

How much will a $200,000 mortgage cost over 30 years

Firstly, it depends on the interest rate you have for your mortgage. Lets say you have a fixed interest rate at 4.5% for your $200,000 mortgage over 30 years. Your monthly mortgage repayments would be $955.

Are mortgages easy to get right now?

At this point in time there are a lot more mortgages being declined than in the past and this is due to the change of Loan to Value Ratio restrictions on properties.

Additionally, even if you could afford the repayments the banks servicing test rates which "stress test" your application could be the reason why they don't accept it. The calculations they generally apply are:

  • Interest rates tested at 7%
  • Any rent received will be scaled down by 25%
  • Any boader or flatmate income will be scaled down by 50%
  • your repayments will be tested on a principal and interest loan for the remainder of the term
1601614029185

Ed McKnight

Ed McKnight is the host of the Property Academy Podcast – NZ's #1 business podcast. He is an economist, having studied at the University of Auckland and the University of Waikato. He's a frequent writer for Informed Investor Magazine and has contributed to NewsHub, Stuff, OneRoof and Property Investor Magazine.