Learn
Amortisation basics
How loan balances reduce over time through regular payments, and the formulas SeeMoney uses to calculate interest, principal, and minimum payments.
Amortisation basics
Amortisation is how a loan balance reduces over time through regular payments. Each payment period, part of your payment covers interest on the opening balance and the remainder pays down principal.
Interest = opening balance × (annual rate ÷ payments per year)
Principal = payment − interest
Closing balance = opening balance − principal
For example, on a $500,000 balance at 5.50% p.a. with monthly payments: the period interest on the opening balance is roughly $2,292. The principal portion is whatever remains of your payment after that interest is deducted.
If your payment is below the period interest, principal becomes negative and the balance increases, this is negative amortisation. SeeMoney models this honestly rather than hiding it.
Periodic interest and rounding
SeeMoney uses simple periodic compounding: interest is calculated once per payment period on the opening balance, not daily. The annual rate is divided by the number of payments per year to get the period rate.
All monetary values are rounded to two decimal places (half-up rounding). Small rounding differences can accumulate over long terms, see Accuracy and limitations for more detail.
Calculated minimum payment
The minimum payment uses the standard amortisation formula over the period count from your remaining term:
Where r = period rate, n = period count, L = current loan balance:
If r = 0: payment = L ÷ n
Otherwise: payment = L × r × (1 + r)n ÷ ((1 + r)n − 1)
This value powers the minimum baseline simulation. It is recomputed when loan inputs change (balance, term, rate, frequency).