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How to calculate P&I repayment?

Discussion in 'Property Finance' started by kennyboi, 6th Sep, 2015.

  1. kennyboi

    kennyboi Well-Known Member

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    Sydney
    Hi,

    I am thinking to switch from IO to PI on my PPOR. I am having trouble trying to work out my monthly repayment.

    Say the loan is 1 Mil, and the bank's repayment calculator is showing a repayment of 4972/month, how do I work out how much is for P and how much is for I?

    As my offset account grows quicker than P repayment, would the repayment still be fixed at 4972/month, or is it going to a reduced figure? If reduced, how do I calculate this amount?

    Thanks
     
  2. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    The monthly interest component can be calculated to within a few dollars using the following formula:
    Amount owing x Interest rate / 12

    The balance would be the principal.

    With principal & interest loans, you enter into a contract to make a minimum monthly repayment (by your calculation $4972/month). Even if you have money in an offset account or have made extra repayments, you'll still need to make that minimum monthly repayment. The extra money simply means you owe less, so you'll pay less interest, and more principal in the subsequent payments.
     
  3. Waterboy

    Waterboy Well-Known Member

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  4. kennyboi

    kennyboi Well-Known Member

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    Sydney
    If there is a change in interest, how does this affect repayment amount, and how to calculate the difference?

    I use Excel to keep track of IO, but I don't know how to formulate my Excel to keep track of P&I.
     
  5. D.T.

    D.T. Adelaide Property Manager Business Member

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    Location:
    Adelaide, SA
    Remember interest is calculated daily but charged monthly, so when the rate changes the remainder of the days in that month have that rate.

    Also remember your offset account balance will come off of the total amount owing when calculating interest.

    Hope this helps in formulating your spreadsheet :)