How Ratey’s mortgage calculations work

Equity and loan-to-value ratio

Total equity = property value minus loan balance. Indicative usable equity = the greater of zero and (0.80 × property value minus loan balance). LVR = loan balance ÷ property value × 100, where the property value is greater than zero.

The 80% figure is a calculator assumption. It does not determine what a lender will approve. These calculations do not deduct selling costs or test income and expenses. Include all relevant secured debt and use the lender’s accepted value when assessing an actual proposal.

Monthly repayments and interest

For a principal-and-interest loan, the model uses the standard level-payment formula: payment = B × i ÷ [1 − (1 + i)^(−n)]. B is the starting balance, i is the annual rate expressed as a decimal divided by 12, and n is the number of remaining months. At a zero rate, payment is B ÷ n.

The schedule applies interest monthly and reduces the balance by principal repaid. The final payment is limited to what remains owing. Rates stay constant throughout a scenario; a changed rate requires a new scenario. This is an estimate, not daily accrual using actual calendar days. Display rounding can also make a displayed payment differ slightly from intermediate calculations.

A projection needs valid balances, rates and a positive remaining term. It does not forecast future lender rate changes, late fees, arrears or changes to product conditions.

Offset contributions and extra repayments

The offset schedule charges monthly interest on the greater of zero and the loan balance minus the offset balance. It assumes a full offset. Cash beyond the loan balance does not produce negative interest. The comparison schedule uses the same starting loan without an offset.

Recurring offset contributions are net additions at month end, after the model’s monthly interest and repayment calculation. They start reducing interest in the next period. Enter the amount left after withdrawals and spending, including any repayments you fund from the offset; do not enter gross salary deposits as though all of them remain saved.

Extra repayments reduce loan principal separately. Avoid counting the same cash as both an extra repayment and an offset contribution. The fully-offset milestone means offset funds cover the outstanding loan; the payoff milestone means the loan balance reaches zero through repayments. Equal account balances do not discharge the mortgage.

Whether an offset covers its additional costs

The offset-worth calculation holds balances and rates constant for one year. Cost without offset = B × r0 + F0. Cost with offset = max(B − S, 0) × r1 + F1. Here B is loan balance, S is average offset balance, r0 and r1 are annual decimal rates, and F0 and F1 are annual fees.

Estimated annual benefit is cost without offset minus cost with offset. When r1 is positive, the break-even average offset balance is [B × (r1 − r0) + F1 − F0] ÷ r1. A negative threshold is treated as zero. A threshold above the loan balance cannot be reached through offset interest savings alone in this model.

Zero-rate cases are compared directly. This static calculation excludes amortisation, changing balances and interest earned elsewhere. Use the offset schedule to explore recurring savings over time.

Refinance costs and the recovery month

The refinance tool models the existing and proposed loan schedules month by month. It compares cumulative interest and ongoing fees, then deducts net switching costs. Switching costs are paid upfront in cash; they are not added to the new loan balance. Enter applicable discharge, setup, valuation, break and insurance costs from actual quotes.

Net switching costs equal upfront costs minus cashback. The model assumes entered cashback arrives at settlement and is not later clawed back. Confirm eligibility, payment timing and retention conditions yourself. Ongoing annual fees are spread evenly across months and stop when the respective modelled loan is paid off.

Cost recovery is the first month when cumulative interest-and-fee savings cover net switching costs. It starts at month zero when net switching costs are zero or negative. A first recovery point is not a promise of lasting savings: later fees or interest differences can reverse the benefit. Check net savings at your selected horizon.

Cost recovery is not calculated by dividing fees by the monthly repayment reduction. Repayments include principal, so smaller payments can mean slower debt reduction. Compare the same remaining term first; when testing a longer term, also compare the balances left at the chosen horizon.

Rates remain constant. A horizon can extend beyond either loan’s payoff, with no further interest or ongoing fees for that paid-off loan. A no-recovery result means net switching costs were not recovered within the selected period under the entered assumptions.

Repayment ratios and dashboard estimates

The mortgage-stress calculator compares mortgage repayments with gross income. It is a simple ratio, not a household spending budget or lender serviceability model. It does not establish approval, assess every debt or apply each lender’s income and expense policies.

Dashboard tracking is separate from these public scenarios. Saved mortgage details feed monthly balance estimates and roughly monthly rate comparisons. Property-value refreshes depend on available provider data. Check saved figures and update dates against your actual records before acting.

Your next-step checklist

Common questions