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Home loans · Offset

Offset account calculator

Every dollar in an offset account is a dollar of your loan that charges no interest. This mortgage offset calculator shows what your balance — and what you add to it each month — really saves, in interest and in years.

FY 2026-27 rates · verified

Rates verified against the official sources — how we check.

What your offset grows by monthly — savings, salary that stays parked, etc.

Your tally

Monthly repayment (unchanged)$3,829.21
Loan paid off5 yrs 1 mo sooner
Interest saved$233,869

Interest accrues on your balance minus the offset — the repayment itself doesn't change.

Assumes a 100% offset on a variable principal-and-interest loan, a steady rate, and monthly compounding. Package fees for offset features aren't included — check they cost less than the saving.

The offset's quiet superpower is tax.

Interest you avoid isn't taxable income — unlike interest you earn in a savings account. And if your home ever becomes a rental, money withdrawn from an offset never touches the loan, so the full loan stays tax-deductible. Money pulled back out of redraw does touch the loan — a mistake accountants see every year.

How an offset account works

An offset account is a transaction account linked to your home loan. When the bank calculates daily interest, it charges you on loan balance minus offset balance. With $600,000 owing and $50,000 in offset, you're charged interest on $550,000 — but your repayment is still calculated on the full loan, so the difference quietly pays down principal. That's the whole trick: same repayment, less of it lost to interest, loan gone years earlier.

The effect compounds. Interest you don't pay this month means a smaller balance next month, which means even less interest — which is why the savings below are so much larger than "offset × rate × years" intuition suggests.

What an offset saves on a typical loan

On a $600,000 loan at 5.9% with 25 years to run (a steady balance, nothing added monthly):

What an offset saves on a typical loan
Offset balanceInterest savedPaid off sooner
$20,000$62,7701 yr 4 mos
$50,000$142,4903 yrs 1 mo
$100,000$246,7855 yrs 4 mos
$150,000$325,5627 yrs 1 mo

Computed by the same tested engine as the calculator above — month-by-month simulation, not a rule of thumb.

Offset vs redraw vs paying it down

All three save the same interest, dollar for dollar. They differ in whose money it is afterwards. Offset money is yours — spend it tomorrow, no questions. Redraw money belongs to the loan — the bank can change redraw rules, and withdrawing it re-borrows against your house. Extra repayments without redraw lock the money away entirely (see the extra repayment calculator for that path).

The tax rule of thumb for anyone who might rent their place out later: savings in offset, never in redraw. Withdrawing offset cash keeps the whole loan attributable to the property (interest deductible); withdrawing redraw creates a mixed-purpose loan that accountants have to untangle forever.

Frequently asked questions

How does a mortgage offset account work?
An offset is an everyday bank account linked to your home loan. Every dollar in it is subtracted from your loan balance before daily interest is calculated — $50,000 offset against a $600,000 loan means you pay interest on $550,000. Your repayment stays the same, so the interest you avoid goes to paying off principal faster.
Offset account vs redraw — what’s the difference?
Both reduce interest the same way. The difference is legal and tax-related: offset money is your money in your account; redraw money has been paid into the loan. For a future investment property this matters enormously — pull cash back out of redraw and you’ve borrowed for whatever you spend it on (often not deductible), while withdrawing from an offset never touches the loan. Many investors keep savings in offset purely to preserve deductibility.
Does an offset account reduce my repayments?
No — your repayment stays the same. The offset reduces the interest portion of each repayment, so more of the same repayment pays down principal. That’s exactly why the loan finishes years early.
Is it better to put money in an offset or pay down the loan?
The interest saving is identical. Offset wins on flexibility — the cash stays yours to spend without asking the bank — and on tax if the property might ever become a rental. Paying down the loan (with redraw) can suit people who don’t trust themselves with an accessible pile of cash. Offset accounts usually come with a package fee or a slightly higher rate, so check the cost covers the benefit.
Are offset savings taxed?
No — and this is an underrated advantage. Interest earned in a savings account is taxed at your marginal rate, but interest avoided through an offset isn’t income. For someone on a 39% marginal rate, a 5.9% offset "return" is equivalent to earning about 9.7% before tax in a savings account.
Do offset accounts work on fixed-rate loans?
Usually not fully. Most fixed loans offer no offset or only a partial offset (a percentage of the balance is offset). Full 100% offsets are a variable-rate feature at most lenders — one of the trade-offs to weigh before fixing.

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Redraw vs offset

Redraw saves the same interest for less cost — until the loan turns investment.

Open calculator →

Assumptions

Standard amortisation maths on a principal-and-interest loan with monthly compounding and a constant rate; 100% offset. The engine behind this page is covered by automated accuracy tests — see the methodology. General information only — not financial advice.