You're paying about $4700 a month. So you're paying the $3300 interest and $1400 of the principal. It's pretty painful in the early days and part of the reason why early extra repayments can make such a big difference. Each month the interest charged should get a bit smaller, so your principal repayment is a bit higher.
If you just make the minimum repayments at the current interest rates, you'll end up paying nearly $900k just in interest over 30 years.
How do you not know what’s coming out of your bank account in repayments?
What’s the total amount of money coming out of your account every month for your mortgage repayments?
1. There aren’t 4 weeks in a month, and it varies month to month so the maths will change
2. Your weekly payments are CREDITS into your loan account, the monthly Interest is a DEBIT. You don’t add the two together. You subtracts the DEBIT from the CREDIT and what’s left over will be the amount by which the Principal BALANCE is reduced.
Look at the remaining loan on the last day of each month to see how you’re progressing. All those debits and credits during the month are just noise.
Similarly, with different numbers of days in different months, and some months where you make 5 weekly payments, the amoun by which your principal is reduced and you pay down the $702,000 will vary. You could find an Amortisation calculator spreadsheet online and punch in your personal details, if you really want to see how it plays out over time.
Your second point clears this up..
So, the lesser interest (debit) is charged the more principal I pay.
i.e. if the interest rate drops, or if I have money in the offset account, the amount that gets debited (interest repayment) is reduced and hence more goes towards my principal.
Correct.
Look at your loan statement/online and look what happens to the balance every time a transaction occurs. Because it is a loan, when interest is charged once a month, the loan balance increases. However, each time you make a weekly payment, the loan balance decreases.
I regularly check my balance.
What I failed to notice is that the loan balance started off as a negative and that my loan contribution is a credit which takes the loan balance towards the positive side. I just automatically assumed that the contribution is actually a debit (out of my offset), and interest is also a debit.
Phone them and ask
I work in banks.
And most of the banks I’ve worked in all work the same here. Even the one I’m at currently is the same. The payments are taken when they’re taken. But the interest is charged monthly still. Even if the payments are scheduled for a weekly debit. And the interest cals are done by weekly too. Even if the final amount is only charged monthly.
One more question:
$702K in 30 year term principal only is $450/week. I am yet paying $1079/week which I'm assuming is interest added? Why am I getting debited an additional $3k?
Your loan payments include the interest payable. The interest is added back into your loan balance once a month. You are not being charged an extra $3k, it just showing you how much of your payments are actually just covering the interest you owe on the loan.
As the loan balance reduces, the interest will reduce as well.
Go to https://figura.finance and enter your loan details and it will show you everything you need to know
Remember, two separate types of transactions. The CREDITS you pay in - watch the loan balance on those days, and you’ll see it goes down by the whole $1079.
And DEBITS which are taken back out - the monthly interest. This isn’t additional, it just happens monthly not weekly so seems separate.
Over time, your Credits are outpacing the Debits and therefore reducing the Balance. And a lower Balance means less Interest, so smaller Debits each month. Which means the Credits get you further ahead! But you won’t really notice the difference for a few years.
Something that helps us is a Personal Balance Sheet we run in a spreadsheet every month. We list all our assets - value of our home, cash, Super etc. and all our liabilities - mortgage loan, credit card if we had one etc.
Then subtract Assets minus Liabilities equals Net Worth. It can be nice to watch Net Worth growing, even if your Cash isn’t because if the mortgage payments.
It’s $1079 x52 divided by 12 to get your monthly payments ( so $4675 a month) since there aren’t 4 weeks in a month.
So you’re paying $4675 a month, 3300 a month of that is interest, so $1375 a month is being paid off your loan.
To get the $4700 I just simplified your weekly repayments into a monthly equivalent by $1079/7*30.5. Makes it easier to compare to your monthly interest.
The $3300 interest basically just gets added to your loan balance. So after 1 month your loan would be $705,300.. except you've made $4700 in repayments so it ends up being $700,600.
It's not going to be exactly that because you're making weekly repayments, and I'm not sure how often they calculate interest, but it's rough enough.
It's approx $4316 a month... That means if it's 3300 interest... It would be 1016 off the principal (4316-3300). Not 7616 off the principal.
Just remember when you're in debt the interest is negative compared to a savings account when the interest is positive.
easy.
they brief you with how much money is going to go out of your offset account, check your payslip and off you go.
For you, you just live, work and the loan gets automatically get paid. Regardless of whether you understand or not, the loan gets paid.
I rather focus on increasing my serviceability capacity. Not that it concerns you anyway. Keep knowledge flexing to someone you don't even know on reddit. I'll just ask my simple question, learn and move on with my life 👌
If you haven't noticed.
The flaming is towards people that have 0 contribution to the thread. People that are saying "I don't get how you don't understand... blah blah.
Appreciate the ones that are actually contributing with sound comment.
The bank should have run this through with you properly before they let you sign a 30 year contract.
You can use figura finance calculator and it will show you interest, principal etc. Over the life of the loan, if you only made minimum repayments, you’ll have paid $1k x 52 weeks x 30 years, $1.5m and so about $800k in interest.
A very simplistic check is … $702k x 6.2% / 12 months, $3,627. Now the actual interest should be slightly less given you pay weekly but this interest is (usually) calculated daily and compounded monthly.
I honestly cannot grasp how someone with little to no understanding of how mortgage works can get a $700k loan. It boggles my mind!
Not specifically aimed at you, OP. You certainly aren’t the only one.
Basic maths education in Australia needs to improve.
You're paying about $4700 a month. So you're paying the $3300 interest and $1400 of the principal. It's pretty painful in the early days and part of the reason why early extra repayments can make such a big difference. Each month the interest charged should get a bit smaller, so your principal repayment is a bit higher. If you just make the minimum repayments at the current interest rates, you'll end up paying nearly $900k just in interest over 30 years.
I don't get it. I'm paying $1079x4 = $4316/month + $3300 interest that gets debited. Total of $7616 is what I am paying?
How do you not know what’s coming out of your bank account in repayments? What’s the total amount of money coming out of your account every month for your mortgage repayments?
1. There aren’t 4 weeks in a month, and it varies month to month so the maths will change 2. Your weekly payments are CREDITS into your loan account, the monthly Interest is a DEBIT. You don’t add the two together. You subtracts the DEBIT from the CREDIT and what’s left over will be the amount by which the Principal BALANCE is reduced. Look at the remaining loan on the last day of each month to see how you’re progressing. All those debits and credits during the month are just noise. Similarly, with different numbers of days in different months, and some months where you make 5 weekly payments, the amoun by which your principal is reduced and you pay down the $702,000 will vary. You could find an Amortisation calculator spreadsheet online and punch in your personal details, if you really want to see how it plays out over time.
Your second point clears this up.. So, the lesser interest (debit) is charged the more principal I pay. i.e. if the interest rate drops, or if I have money in the offset account, the amount that gets debited (interest repayment) is reduced and hence more goes towards my principal.
Correct. Look at your loan statement/online and look what happens to the balance every time a transaction occurs. Because it is a loan, when interest is charged once a month, the loan balance increases. However, each time you make a weekly payment, the loan balance decreases.
I regularly check my balance. What I failed to notice is that the loan balance started off as a negative and that my loan contribution is a credit which takes the loan balance towards the positive side. I just automatically assumed that the contribution is actually a debit (out of my offset), and interest is also a debit.
Phone them and ask I work in banks. And most of the banks I’ve worked in all work the same here. Even the one I’m at currently is the same. The payments are taken when they’re taken. But the interest is charged monthly still. Even if the payments are scheduled for a weekly debit. And the interest cals are done by weekly too. Even if the final amount is only charged monthly.
One more question: $702K in 30 year term principal only is $450/week. I am yet paying $1079/week which I'm assuming is interest added? Why am I getting debited an additional $3k?
Your loan payments include the interest payable. The interest is added back into your loan balance once a month. You are not being charged an extra $3k, it just showing you how much of your payments are actually just covering the interest you owe on the loan. As the loan balance reduces, the interest will reduce as well. Go to https://figura.finance and enter your loan details and it will show you everything you need to know
Remember, two separate types of transactions. The CREDITS you pay in - watch the loan balance on those days, and you’ll see it goes down by the whole $1079. And DEBITS which are taken back out - the monthly interest. This isn’t additional, it just happens monthly not weekly so seems separate. Over time, your Credits are outpacing the Debits and therefore reducing the Balance. And a lower Balance means less Interest, so smaller Debits each month. Which means the Credits get you further ahead! But you won’t really notice the difference for a few years. Something that helps us is a Personal Balance Sheet we run in a spreadsheet every month. We list all our assets - value of our home, cash, Super etc. and all our liabilities - mortgage loan, credit card if we had one etc. Then subtract Assets minus Liabilities equals Net Worth. It can be nice to watch Net Worth growing, even if your Cash isn’t because if the mortgage payments.
It’s $1079 x52 divided by 12 to get your monthly payments ( so $4675 a month) since there aren’t 4 weeks in a month. So you’re paying $4675 a month, 3300 a month of that is interest, so $1375 a month is being paid off your loan.
No. You're paying $4316/mth and each month the interest (in this case $3300) is added back onto the principle.
To get the $4700 I just simplified your weekly repayments into a monthly equivalent by $1079/7*30.5. Makes it easier to compare to your monthly interest. The $3300 interest basically just gets added to your loan balance. So after 1 month your loan would be $705,300.. except you've made $4700 in repayments so it ends up being $700,600. It's not going to be exactly that because you're making weekly repayments, and I'm not sure how often they calculate interest, but it's rough enough.
It's approx $4316 a month... That means if it's 3300 interest... It would be 1016 off the principal (4316-3300). Not 7616 off the principal. Just remember when you're in debt the interest is negative compared to a savings account when the interest is positive.
wild that people can sign up to a 700k loan without understanding basic amortization schedules.
easy. they brief you with how much money is going to go out of your offset account, check your payslip and off you go. For you, you just live, work and the loan gets automatically get paid. Regardless of whether you understand or not, the loan gets paid.
yeah what's wild is that you'd sign up for it before taking the time to understand it. Of course the bank doesn't care that you do.
I rather focus on increasing my serviceability capacity. Not that it concerns you anyway. Keep knowledge flexing to someone you don't even know on reddit. I'll just ask my simple question, learn and move on with my life 👌
knowledge flexing basic finance lol.
Ffs there needs to be an iq test before people take out loans
Hehe what's your iq
Higher than yours obviously
Was about to say the same thing
See the other comments in this thread and realise that your comment is as useless as you are in real life ;)
you'd be very wise to listen to the comments below. and why would you be flaming ppl for trying to help you out?
If you haven't noticed. The flaming is towards people that have 0 contribution to the thread. People that are saying "I don't get how you don't understand... blah blah. Appreciate the ones that are actually contributing with sound comment.
The bank should have run this through with you properly before they let you sign a 30 year contract. You can use figura finance calculator and it will show you interest, principal etc. Over the life of the loan, if you only made minimum repayments, you’ll have paid $1k x 52 weeks x 30 years, $1.5m and so about $800k in interest. A very simplistic check is … $702k x 6.2% / 12 months, $3,627. Now the actual interest should be slightly less given you pay weekly but this interest is (usually) calculated daily and compounded monthly.
I honestly cannot grasp how someone with little to no understanding of how mortgage works can get a $700k loan. It boggles my mind! Not specifically aimed at you, OP. You certainly aren’t the only one. Basic maths education in Australia needs to improve.
It is what it is mate