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How does the lender calculate and charge the interest I pay?

Lenders in Australia calculate and accrue interest charges every day, for instance an advertised interest rate of 5% per annum is actually charged at 5 divided by 365 (or 366 in 2016) per day. These daily interest accruals are added up once a month and the total monthly amount is charged to you, usually via the home loan account.

Making extra repayments will significantly reduce the amount of interest you get charged. Extra repayments are repayments made earlier and larger than the minimum repayment obligation set out in the loan contract.

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Helen is Head of Content at uno - the smarter, faster way to get a better home loan.


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