Amortisation Calculator NZ

An amortising loan is one repaid by equal instalments that cover both interest and principal, which is how almost every New Zealand table mortgage and personal loan works. This works out that instalment, the total you repay over the life of the loan, and the split between principal and interest. The split is the number worth looking at, because it is the least intuitive part of how these loans behave. Interest is charged on the balance outstanding, so at the start, when the balance is at its largest, most of your payment is interest and very little touches the principal. That reverses slowly, and on a thirty year term the crossover, where more of each payment goes to principal than interest, arrives surprisingly late. The calculator shows where your first payment goes, and where you stand after the first year, which is usually a sobering figure for anyone who assumed a year of payments had made a visible dent. It also shows what one extra payment a year does, because on a long loan that is the single most effective lever available and it works through exactly this mechanism: every extra dollar reduces the balance all future interest is charged on.

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$
%
$3,160
repayment each period
Total repaid$1,137,722
Total interest$637,722
Interest in the first payment$2,708
Balance after one year$494,411
Interest as a share of the loan127.5%

An estimate on the figures entered. Real loans include fees, may have offset or revolving portions, and rates change at the end of any fixed period. Before any lender fees.

How it works

The periodic rate is the annual rate divided by the number of payments a year, and the number of payments is the term multiplied by that frequency. The instalment comes from the standard amortisation formula: the loan amount multiplied by the periodic rate, divided by one minus the quantity one plus the periodic rate raised to the power of minus the number of payments. Interest in any payment is the balance at that point multiplied by the periodic rate, and the rest reduces the principal. The balance after a year is found by stepping through the first year's payments one at a time rather than approximating.

Worked example

Take the defaults: $500,000 at 6.5 percent over 30 years, paid monthly. The periodic rate is 6.5 divided by 12 divided by 100, which is 0.0054167, over 360 payments. The formula returns a repayment of about $3,160. Over 360 payments that totals roughly $1,137,722, of which about $637,722 is interest, so you repay more in interest than you borrowed. The first payment is the striking part: $500,000 x 0.0054167 is about $2,708 of interest, leaving only around $452 off the principal. After a full year of payments the balance has fallen to about $494,411, a reduction of under $5,600 on roughly $37,900 paid.

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Data sources: uses the standard amortisation formula. Figures exclude lender fees and assume the rate holds for the full term, which it will not on a New Zealand fixed-rate loan.

Frequently asked questions

What does amortisation mean on a loan?

It means the loan is repaid by equal instalments that cover both interest and principal, so the balance reduces to zero by the end of the term. This is how a New Zealand table mortgage works, as opposed to an interest-only loan where the balance does not reduce.

Why is most of my early payment interest?

Because interest is charged on the balance outstanding, which is at its largest at the start. On a $500,000 loan at 6.5 percent, the first monthly payment is about $2,708 interest and only around $452 principal. The proportion shifts slowly as the balance falls.

Does paying fortnightly instead of monthly save money?

It can, but not for the reason usually given. If you pay half the monthly amount every fortnight you make 26 half-payments a year, which is 13 monthly payments rather than 12, so the saving comes from paying more each year rather than from the frequency itself.