How bond repayments work

Plain-English explanation of amortisation, interest, and why extra repayments can matter.

What does “amortisation” mean?

An amortised loan has a fixed monthly instalment (assuming the rate stays the same). Each payment is split into interest and principal. Early on, a larger portion often goes to interest; later, more goes to principal.

Why early extra payments help

Extra payments (even small ones) reduce the outstanding balance. Interest is usually calculated on that balance, so lowering it sooner can reduce total interest paid across the life of the loan.

Why your calculator result differs from your bank

• Fees (initiation, service fees)
• Insurance (homeowners, life cover)
• Different interest conventions or rounding
• Rate changes over time