I would like to be able to calculate exactly how much interest i am meant to pay each fortnight on my home loan. This is purely out of curiosity and i have no idea what formula to use. I want to check if my bank is calculating it correctly but i don't want to buy one of those loan checkers. What is more confusing is how rates keep changing so often too. If any one knows the formula, i would love to know it. Hope you can help me!!!
How to calculate interest on a home loan?
Calculating the interest is easy if the loan balance doesn't change in the month. Also thanks to the RBA the rate likely changed in the month which will make things harder.
This is what you do (Australia only):
Interest for the month = sum of daily interest since the last time interest was charged
Daily interest = rate / 365 * balance
This is the exact way they do it, they calculate the interest for each day and then add it up to form the final figure. Everyone stuffs it up because there are usually different numbers of days in each month, causing slightly different repayment amounts.
Honestly, they never stuff up the calculation, but they DO apply the wrong interest rate %26amp; fees to loans. That is where they get people!
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