In short: This calculator shows how much interest an offset account saves and how many years it removes from your loan. The rule of thumb: every dollar sitting in a 100% offset earns you the equivalent of your home-loan rate, tax free. On a $600,000 loan at 6.00% p.a., a steady $40,000 offset balance saves around $168,000 in interest and cuts almost four years off a 30-year term.
- Loan paid off6.2 years sooner
- Interest without offset$640,090
- Interest with offset$366,822
- Monthly repayment (unchanged)$3,690.74
Assumes repayments stay at the minimum so the offset shortens the loan. Money in offset earns you the loan rate, tax-free.
Interest saved with offset: $273,268
That is a general estimate on standard assumptions. Every lender applies its own expense benchmarks, income shading and policy, so the real figure moves from lender to lender. Gorakh spent years as a senior credit officer deciding exactly these questions. Send him the numbers above and he will tell you what is realistic and which lenders fit — at no cost to you for home loans.
- A former senior credit officer reads itGorakh assessed loan applications on the lender side before he became a broker.
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An offset account is a transaction account linked to your mortgage. The bank only charges interest on the loan balance minus what is in the offset,
How this calculator works
Daily interest on the net balance
Lenders calculate home-loan interest daily on the outstanding balance and charge it monthly. With a 100% offset, the daily calculation uses (loan balance − offset balance). The calculator applies the same logic: it runs a standard 30-year amortisation at your interest rate, but charges interest only on the net figure each month.
Repayments stay the same
Your minimum repayment does not fall when you hold money in offset. Because less of each repayment is eaten by interest, more goes to principal, so the loan closes early. The calculator reports both the interest saved and the new payoff date.
Assumptions
- The offset balance stays constant unless you tell it otherwise (the widget also lets you model a growing balance).
- No offset or package fee is deducted unless you add one.
How to use the result
Compare the "interest saved" figure against what the same cash would earn in a savings account after tax. Savings interest is taxed at your marginal rate, while an offset benefit is not, so a 6.00% offset is worth roughly 8.5–9% pre-tax to someone on the 30% bracket plus Medicare levy. Our offset vs redraw guide compares the two if you are weighing a fee-free redraw loan instead.
Worked example
A Craigieburn couple buys a $650,000 home with a $600,000 loan over 30 years. For illustration, at 6.00% p.a. the minimum repayment is $3,597 a month. They keep their salaries and emergency fund in a 100% offset.
| Scenario | Offset balance | Total interest over the loan | Interest saved | Loan paid off in |
|---|---|---|---|---|
| No offset | $0 | $695,029 | – | 30 years |
| Modest buffer | $20,000 | $603,382 | $91,647 | 27.9 years |
| Emergency fund | $40,000 | $526,723 | $168,306 | 26.2 years |
| Large balance | $100,000 | $356,371 | $338,658 | 22.2 years |
| $40,000 growing by $500/month | Rising | $384,770 | $310,259 | 22.8 years |
Figures are illustrative, assume a constant rate and minimum repayments, and exclude fees. In the first year alone, $40,000 in offset avoids about $2,400 of interest.
What this calculator doesn't include
- Partial offsets (some fixed-rate loans offer 40% offset only) unless you adjust the percentage.
- Rate changes over the life of the loan. A move up or down changes both the interest bill and the saving.
- Annual package fees, monthly account fees or the cost of switching lenders to obtain an offset.
- Any tax effect on investment loans, where reducing deductible interest changes your return; see the negative gearing guide.
Tips to improve the outcome
- Have your salary paid straight into the offset and run daily spending from a credit card paid in full each month, so the average daily balance stays as high as possible.
- Keep extra repayments in offset instead of paying them into the loan if you may need access later, especially on an owner-occupied home you might one day rent out.
- If you are fixing part of your loan, ask which portion carries the offset. See the fixed vs variable guide.
- Review the rate every 12 to 18 months. An offset does not help much if you are paying 0.50% more than you need to; refinancing may lift the saving further.
Frequently asked questions
Does an offset account actually save money?
Yes, provided you keep a meaningful balance in it. Interest is charged on your loan balance minus the offset balance, so $40,000 in offset on a 6.00% loan avoids about $2,400 of interest in the first year and far more over time because the loan closes sooner. The saving is tax free, which is why it beats an ordinary savings account paying a similar rate.
Is an offset account better than redraw?
They deliver a similar interest saving, but the money is treated differently. Offset funds are your cash in a transaction account and you can use them any time. Redraw is a repayment you have made that the lender lets you take back, and access can be restricted. Offset also protects tax deductibility if the property later becomes an investment. Redraw loans are often cheaper and fee free.
How much do I need in offset to make it worthwhile?
There is no minimum, but the benefit has to outweigh any extra fee or rate loading. On a 6.00% loan, an annual package fee of $395 is covered by keeping about $6,600 in offset all year. Most households with salaries and a small buffer flowing through the account exceed that easily, which is why offset loans suit borrowers who bank actively.
Can I have an offset on a fixed-rate loan?
Some lenders offer a full or partial offset on fixed loans; many do not. A common structure is a split loan with the offset attached to the variable portion, which gives you rate certainty on one part and flexibility on the other.
Talk to GNT Finance
Whether an offset is worth paying for depends on your loan size, balance habits and the rate on offer, and the answer changes lender by lender. GNT Finance compares offset and redraw loans across our panel and structures them around how you actually bank, at no cost to you for our home-loan service in most cases. Book a free consultation or call Gorakh on 0426 403 703.
Written by Gorakh Timilsina
Founder, CEO & Senior Mortgage Consultant at GNT Finance. Gorakh started as a broker assistant, spent years as a senior credit officer assessing loan applications, and now helps Melbourne families get the right loan approved. English, Nepali and Hindi spoken.