Introductory Rate Loan Calculator

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These figures are estimates based on the numbers you enter. What actually happens to your rate when the introductory period ends depends on your lender’s policy at the time, which a broker can check before it happens, not after.
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What the six numbers on this calculator mean

Three fields describe the loan. Three describe the introductory structure sitting on top of it, and one of those three quietly does most of the work.

Loan amount

What you are borrowing. Unlike an interest-only structure, this balance starts reducing from month one, even during the introductory period.

Loan term

The full length of the loan, typically 25 to 30 years. The introductory-period repayment is calculated against this full term, not just the introductory years.

Repayment frequency

Monthly, fortnightly or weekly. Changes how the total is split up, not the total interest charged over the loan.

Introductory term

How long the discounted rate lasts, commonly 1 to 5 years. This is sometimes called a honeymoon period.

Introductory rate

The discounted rate that applies for the introductory term. Repayments during this period are calculated at this rate, over the full loan term.

Variable interest rate

The rate the loan reverts to once the introductory term ends, sometimes called the revert rate. This is the number worth the closest look, covered further down.

What actually happens when the introductory period ends

Unlike an interest-only loan, the repayment during the introductory period on this calculator already includes principal. It is calculated as a standard principal and interest repayment on the full loan amount, at the introductory rate, spread over the entire loan term. That means the balance is genuinely going down from day one, just more slowly than it will once the rate moves higher.
When the introductory period ends, the repayment is recalculated at the new, higher variable rate, on whatever balance is left, spread over whatever term is left. Because some principal has already come off, and because the increase is only in the rate rather than in a switch from interest-only to principal and interest, the jump is real but noticeably smaller than the jump on an equivalent interest-only loan.

Worked example: $250,000 at 4 per cent for 5 years, reverting to 5.5 per cent

The figures below use the calculator’s own default inputs: a $250,000 loan, a 30 year term, a 5 year introductory period at 4 per cent, reverting to a 5.5 per cent variable rate.

During the introductory period (5 years)

Monthly repayment: $1,193.54

Calculated at 4% over the full 30 year term. By the end of year 5, the balance has fallen to about $226,119.

After the introductory period (remaining 25 years)

Monthly repayment: $1,388.57

Recalculated at 5.5% on the remaining balance, over the remaining 25 years.
The jump is $195.03 a month, a 16.3 per cent increase, noticeably smaller than the roughly one-third jump on an equivalent interest-only loan, because principal was already being repaid. Total interest over the life of this loan comes to $238,182. If the loan had been on the 5.5% variable rate from day one, total interest would have been $261,010, a difference of $22,828 attributable to the five years at the lower rate.

These are estimates only. They assume both rates stay constant, which real variable rates do not.

The revert rate, and the loyalty tax

The rate this calculator reverts to is whatever variable rate you enter, but the real question most borrowers should ask is a different one: is that revert rate actually competitive, or is it what your lender happens to charge existing customers who have not asked for anything better?

What the ACCC found

The ACCC’s Home Loan Price Inquiry found that, as at September 2020, existing variable-rate borrowers with loans three to five years old were paying on average 0.58 percentage points more than new customers at the same lender. The gap widened the older the loan, up to roughly 1.04 percentage points for loans over ten years old.

Why an introductory loan is exposed to it twice

An introductory-rate loan reverts to a standard variable rate at a defined moment, which is a natural prompt to check pricing. Left unreviewed, that revert rate can itself quietly drift into loyalty-tax territory over the following years, the same as any variable-rate loan.
None of this changes what the calculator above works out, since it can only run the variable rate you enter. What it means in practice is that the moment the introductory period ends is a natural point to check whether the revert rate is still competitive, rather than assuming it is, since that is precisely the point in a loan’s life the industry’s own regulator found borrowers start paying more than they need to.

When the introductory period is ending

Reviewing the rate before the introductory period ends, rather than after the first higher repayment lands, is generally the better time to act. Our refinancing page covers what is involved in checking whether a better rate is available, either with the current lender or elsewhere, once that date is approaching.

Before you rely on this number

This calculator assumes both the introductory rate and the variable rate stay constant for their respective periods, and that no extra repayments are made. All three assumptions are common ways the real number ends up different from the estimate, particularly the variable rate, which is not fixed for the years this calculator projects across.
Related tools on this site: interest-only mortgage calculator, mortgage refinance calculator and the borrowing power calculator.

When the introductory period is approaching its end, refinancing is the natural next step to check.
Sources
ASIC MoneySmart: home loan guidance.
ACCC: Home Loan Price Inquiry, final report, on the pricing gap between new and existing variable-rate borrowers.

About the figures on this page. The worked example uses the calculator’s own default inputs, independently checked against a standard amortisation calculation and found to match exactly. Every other figure is illustrative of how the introductory-rate mechanic behaves and is not a quote for any specific loan.

General information only, and not financial advice. Nothing on this page takes your objectives, financial situation or needs into account, and it is not a recommendation to choose an introductory-rate structure. Loanity is a credit representative and can provide credit assistance once we understand your circumstances.
STILL GOT QUESTIONS?

Introductory rate loan calculator questions, answered

How do I calculate introductory rate loan repayments?

Enter the loan amount, loan term, introductory rate and period, and the variable rate it reverts to. The calculator works out the repayment during the introductory period, calculated at that rate over the full loan term, then recalculates the repayment at the variable rate on whatever balance is left once the introductory period ends.

On the calculator’s own default example, a $250,000 loan moving from a 4% introductory rate to a 5.5% variable rate sees the monthly repayment rise from $1,193.54 to $1,388.57, an increase of $195.03, or about 16.3 per cent. The exact figure depends on your balance, rates and remaining term.

Usually smaller on an introductory rate loan, because principal is already being repaid during the introductory period. On an equivalent interest-only loan the jump is typically around a third, versus roughly one-sixth here, because an interest-only loan has repaid no principal at all by the time its low-repayment period ends.

The advertised rate, if that is genuinely what has been offered, but treat the variable rate field with more caution. Since that is the rate charging for the majority of the loan term, a small difference there matters more to the total interest figure than the introductory rate does.

It is the ACCC’s term for the finding that existing borrowers, on average, pay a higher variable rate than new customers at the same lender, a gap that grows the older the loan. An introductory-rate loan reverts to a variable rate at a defined date, which is a natural point to check whether that rate is still competitive rather than assume it is.

Sometimes, subject to the lender and a fresh application, but it is not automatic and is usually treated as a new offer rather than a continuation. Whether it is worth pursuing depends on what else is available at the time, which is worth comparing rather than assuming.

No. It models the interest and repayment mechanics only. Application fees, ongoing fees, and any costs associated with switching lenders at the end of the introductory period are not included, since those vary by lender and are not part of a rate-and-term calculation.

Because it is calculated as a standard principal and interest repayment at the introductory rate, spread over the full loan term, not as an interest-only repayment. This is the main mechanical difference between an introductory-rate loan and an interest-only loan, and it is why the later jump is smaller.

Usually yes, by the amount of interest saved during the discounted years, shown in the worked example above as $22,828 over the life of the loan. Whether that holds for your own numbers depends on how the variable rate you enter compares with what would otherwise have applied from day one.

Check whether the revert rate is still competitive before the change happens, not after the first higher repayment arrives. Our refinancing page covers what that review involves, whether the outcome is staying with the current lender on a better rate or moving elsewhere.

Important information about this calculator
The figures generated by this calculator are illustrative examples designed to demonstrate potential repayments during and after an introductory (honeymoon) rate period. Calculations assume that interest rates, revert rates, and ongoing fees remain static throughout the life of the loan, which does not reflect actual market conditions.
Variable interest rates, lender margins, and revert rates fluctuate over time in response to market shifts and RBA cash rate decisions. This page may not reflect the most recent lender policy updates or product changes, and Loanity does not guarantee the accuracy or reliability of the projected savings or repayments. This is not an offer or approval of credit. Speak with a Loanity mortgage broker to compare live lender products and assess the long-term impact of introductory rates on your financial situation.