minimum repayment on home loan


You mention (emphasis mine):

When I'm looking around for loans, they mention the loan period (usually 30 years) the variable interest rate (3-5%) and the LVR% ratio (usually 80%) needed to start the loan

If it it were fixed term and fixed interest rate, you could plug the numbers into any mortgage payment calculator and determine what you need to pay every month (ignoring things like taxes and insurance).

However, with a fixed term and varying rate, your monthly payment can change. If the interest rate goes up, but you're still going to pay off the loan in the same amount of time, you need to pay more to cover the higher interest. How much more depends on how much higher the rate is and how much you still owe.

Calculating what you'd pay per month if it were it a fixed-rate mortgage can give you a rough idea of what you'd pay, but that amount could change as your rate changes.


Yoozer8 gave a sufficient answer and you should up vote it, I certainly did.

I think you are having difficulty in understanding his answer is that home loans and credit cards are two very different types of loans. One is for a fixed loan, simple interest and the other is revolving credit.

With a credit card, you charge some stuff, pay your bill, and then next month charge some more stuff. If your bill is exactly the same as it was the month before, that is just coincidental and likely rare. Its revolving credit and a credit card account could last your whole life. The interest rate can change frequently and without bounds.

A home mortgage is very different. At the time of home purchase you sign a contract for a fixed amount for a fixed period of time. The interest rate may or may not be fixed, but even in the case of an ARM there are limits to when, how often, and how much the interest rate can change. There are many legal documents surrounding the creation of a mortgage and the key is that it is secured by the property being purchased. If you default on a mortgage, you will eventually lose your house.

With a fixed rate mortgage, your payments for the loan never change. Your escrow amounts may change, but that is a different topic. Even with an ARM the interest portion of your payment will change, but again it is for a fixed period of time until the next possible time it may change. You can prepay a mortgage payment which will allow you to skip the next payment but most people do not do this. Instead they pay extra to principle. The only effect of that is it shortens the loan.

A mortgage will always end, someday. Thirty years may seem like a long time, but it will end.


Mortgage loans are normally for a specified amount, for a fixed period of time and a fixed interest rate. (Back to that point in a moment.) For example, you borrow $100,000 for 30 years at 4%. The bank then calculates how much you have to pay each month so that, allowing for interest, you will pay off the loan in the specified amount of time. The formula is a bit complicated, but there are plenty of "mortgage loan payment calculators" on the internet. For example, https://www.zillow.com/mortgage-calculator/

If you miss a payment or pay less than the required payment amount, the bank will contact you and request you to make up the payment. If you don't, sooner or later they'll be taking you to court to repossess your house.

With an installment loan like a mortgage, the bank normally doesn't talk about a "minimum payment amount" but simply about the "payment amount". The payment amount is the same for the entire life of the loan. At the beginning most of this goes to pay interest and only a small percentage goes to the principle. But as you gradually work down the principle, less and less goes to interest so that your last few payments are almost all principle.

If you pay more than the regular payment amount, the extra goes directly to principle. This reduces the amount of interest you pay the next month and all following months. You still have the same payment amount, but now more of it is going to principle. So if you make extra payments, you'll pay off the loan in less than the originally scheduled amount of time.

Some installment loans have a "pre-payment penalty". This means that if you make extra payments, you still pay some portion of the interest that you would have paid. Most, maybe all, mortgages in the US do not have pre-payment penalties these days.

Sometimes the interest rate is not fixed, but changes periodically. This is called an ARM, or "Adjustable Rate Mortgage". There will normally be specific dates when the rate can change, like after the first 5 years and every 2 years after that or some such. Of course when the interest rate changes than your payment amount will change.

Mortgage payments often include payments to an "escrow account". The bank keeps this account to pay your property taxes and home owners insurance. From the bank's point of view, they want to make sure that your property taxes are paid, because if you failed to pay taxes and the government repossessed your property, they no longer have any collateral for the loan. Basically, they take the total of your property taxes plus insurance for the year, divide by 12, and you have to pay that much each month. The real formula is more complicated because you have to build up enough in the escrow that there's always enough there when a bill comes in, but there are laws against them requiring you to have excessive surpluses.