First Home Loan Repayments: How Much They Cost and Why

First home loan repayments are the regular payments you make to your lender once you have a mortgage, and they are made up of two parts: the interest charged on what you owe, plus a slice of the amount you borrowed. How much are home loan repayments? It depends on your loan amount, your interest rate, the length of your loan, and how often you repay. There is no single answer that fits everyone, because the figure changes with your circumstances and your lender’s criteria.

This guide explains how first home loan repayments are worked out, what makes them go up or down, the difference between repayment types, and a few practical ways first home buyers can keep the cost down over the life of the loan.

How your first home loan repayments are calculated

Your repayments are calculated from four things: the loan amount, the interest rate, the loan term, and the repayment frequency you choose. Change any one of them and the repayment changes.

Most home loans run for a term of 25 or 30 years. A longer term spreads the loan over more payments, so each repayment is smaller, but you usually pay more interest in total because you owe money for longer. A shorter term does the opposite.

Interest is charged on the balance you still owe, and it compounds on the same frequency as the repayments you select, whether that is weekly, fortnightly, monthly, quarterly or annually. In the early years, most of each repayment goes towards interest rather than the amount you borrowed, which is why the balance falls slowly at first.

A quick way to get a rough figure for your own situation is to use an online calculator before you speak to anyone. Try the borrowing power calculator to see an estimate first.

Principal and interest, or interest only

There are two main ways your repayments can be structured, and they affect mortgage repayments for a first home buyer quite differently.

With a principal and interest loan, each regular repayment covers the interest charged plus part of the amount you borrowed, so the balance falls over time. This is the structure most first home buyers use, because you are steadily paying down what you owe.

With an interest only loan, your repayments only cover the interest on the amount borrowed, and you are not paying off the principal. Repayments are lower at first, but the balance does not reduce, so you have more to repay later.

What makes your repayments go up or down

A few levers move your repayment figure, and it helps to understand each one before you commit.

Your interest rate is the biggest single factor. You can choose a fixed rate, which stays the same for a set period, for example five years, or a variable rate, which can go up or down as the lending market changes. With a variable rate, your repayments can change over time.

Rates across the market move with broader conditions. The Reserve Bank of Australia sets a cash rate that influences other interest rates in the economy, including the rates charged on loans. As a reference point, the cash rate target was 4.35 per cent, effective 6 May 2026. Your actual rate depends on your lender, your loan and your circumstances, not on the cash rate alone.

When you compare loans, look at the comparison rate, not just the advertised rate. A comparison rate is a single figure for the cost of a loan that includes the interest rate and most fees, so it gives you a fairer picture of what a loan really costs. Your deposit also shapes the loan amount and the rate you may be offered, so it is worth understanding What is lvr first home buyer before you compare.

How repayment frequency changes the total cost

How often you repay can quietly make a difference over the years.

Switching to fortnightly repayments means you make the equivalent of an extra month of repayments each year, because each year has 26 fortnights rather than 12 monthly payments. Paying a little more often can reduce the interest you pay and shorten the loan, without a large change to your weekly budget.

Ways first home buyers can lower the cost over time

Once your loan is running, there are a few accepted ways to reduce the interest you pay across the life of the loan. None of these guarantee a saving, because the result depends on your loan and your circumstances, but they are worth understanding.

• Make extra repayments. In the early years of a home loan, most of your repayment goes towards interest, so extra payments during this time reduce the interest you pay over the life of the loan.
• Use an offset account or a redraw facility. These are ways of putting extra money against your loan to reduce the amount of interest you pay. For example, with a $500,000 loan and $20,000 in an offset account, you only pay interest on $480,000.
• Put windfalls towards the loan. Directing a tax refund, bonus or other lump sum into your mortgage can help you pay off the loan faster.

Frequently asked questions

Talk to the team at Finance Lab

If you are buying your first home and want help understanding what your repayments might look like across different lenders, the team at Finance Lab can walk you through your options and the figures that apply to your situation.