Offset account calculator
What money parked in an offset account is worth: interest saved, and how much sooner the loan finishes.
Interest the offset saves
$250,907
and clears the loan 5.6 years sooner
- Monthly repayment
- $3,711.25
- Interest with offset
- $326,998
- Interest without
- $577,905
| Loan balance | $580,000 |
|---|---|
| In the offset today | $45,000 |
| Interest saved | $250,907 |
- Money in an offset earns the loan rate, tax-free — usually more than a savings account nets.
$45,000 offset against a 6.1% loan saves about $2,745 of interest in the first year alone, and the saving compounds.
Side by side
How this is calculated
Interest is charged on the net balance
Each month interest is calculated on the loan balance minus whatever sits in the offset. On $580,000 with $45,000 offset at 6.1%, interest is charged on $535,000 — about $229 a month less.
interest = (loan − offset) × rate ÷ 12The repayment does not change
Because the instalment stays fixed, every dollar of interest the offset saves goes to principal instead. That $229 a month of saved interest becomes $229 a month of extra principal, which is why the loan finishes years early rather than the payment getting smaller.
Worked example: $580,000 at 6.1% with 26 years left
| Loan balance | $580,000 |
|---|---|
| Rate | 6.10% |
| In the offset | $45,000 |
| Adding monthly | $500 |
| Monthly repayment | unchanged |
|---|---|
| Interest saved | tens of thousands |
| Loan ends | years earlier |
The offset earns an effective 6.1% tax-free. A savings account paying 4.5% nets about 2.9% at a 35% marginal rate — less than half as good.
What this assumes
- The offset is 100% against the loan.
- The rate stays fixed for the whole term.
- The offset balance is never spent.
- No account or package fees.
Where this commonly goes wrong
- Partial offset accounts credit only a fraction — often 40–80% — of the balance, which changes the answer proportionally.
- A package fee of $300–400 a year cancels the benefit of an offset balance below roughly $6,000 at 6%.
- Redraw is not an offset: redrawn money is new borrowing, which can change the tax deductibility of the loan on an investment property.
Questions
How does an offset account work?
The balance in the offset is subtracted from the loan before interest is calculated. Keep $45,000 in an offset against a $580,000 loan and you are charged interest on $535,000, while the money stays available to spend.
Is an offset better than a savings account?
Almost always, because the saving is untaxed. An offset against a 6.1% loan is worth a full 6.1%; a savings account paying 4.5% nets about 2.9% after tax at a 35% marginal rate.
Offset or extra repayments?
Financially they are nearly identical — both cut the interest charged. The offset keeps the money accessible, which matters if it is also your emergency fund. Extra repayments are harder to undo, which some people prefer.
What is the difference between offset and redraw?
Redraw pulls back money you already repaid, so drawing it out counts as new borrowing. On an investment property that can change what portion of the loan interest is deductible. An offset never touches the loan balance and avoids the issue.
Is a package fee worth paying for an offset?
Only above a break-even balance. A $395 annual fee against a 6.1% loan needs about $6,500 sitting in the offset just to cover itself. Below that, a lower-rate loan without the package usually wins.
Can I have more than one offset account?
Many lenders allow several against one loan, which is useful for keeping an emergency fund, a sinking fund and everyday money separate while all of them reduce the same interest charge.
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Sources
This calculator does arithmetic on the figures you enter. It does not account for tax, fees, or your personal circumstances.
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