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Offset account calculator
Money in an offset account comes off your loan balance before interest is charged. This works out how much interest that saves over the life of the loan, and how much sooner the loan is paid off, if your repayment stays the same. Free, no sign-up, and every assumption is on the page.
Sources last checked:
Interest saved
$223,707
Over the life of the loan: $518,912 of interest instead of $742,618.
Time saved
4 years 11 months
Paid off in 25 years 1 month instead of 30 years, with the repayment unchanged.
Monthly repayment
$3,729
Principal and interest on $600,000 over 30 years. The same with or without the offset.
First month's saving
$264
Interest you don't pay in month one. It goes to the principal instead.
After 23 years 11 months your offset would match what's left on the loan. From then on no interest is charged, and you could clear the loan from the offset instead of repaying it to the end.
An estimate, not advice. It assumes interest is calculated daily on the loan balance less the offset balance and charged monthly, with each month a twelfth of a year; that your repayment stays the same, so the saving goes to principal; that the rate never changes; that the offset balance stays at what you enter, plus any monthly additions, and is never drawn down. It leaves out fees and any higher rate an offset loan may carry. Read Moneysmart's page on offset accounts, and check with your lender that your offset is linked and working.
How an offset account works
Your savings sit against the loan, and the loan charges less.
01
Your money sits in it
An offset is an everyday transaction account linked to your loan. Pay can go in, bills can come out, and the money stays yours.
02
It comes off the balance
Interest on most home loans is calculated daily. The lender takes the offset balance off the loan balance first, so $50,000 against $600,000 means interest on $550,000.
03
Your repayment stays put
If the repayment doesn't change, the interest you don't pay goes to the principal instead. The balance falls faster every month.
04
The loan ends early
Less principal means less interest next month, and so on. Kept up for years, that compounds into years off the loan.
A worked example
What an offset saves on a typical loan.
A $600,000 loan at 6% with 30 years to go has a repayment of $3,597 a month and charges $695,029 of interest over the term. Keep $50,000 in the offset the whole time and, in the first month, interest is charged on $550,000: $250 less. Leave the repayment where it is and that $250 goes to the principal, every month, growing as the balance falls.
Over the life of the loan it saves $202,175 of interest, and the loan is paid off in 25 years 4 months instead of 30 years: 4 years 8 months sooner. Here is the same loan with other balances kept in the offset:
| In the offset | First month | Interest saved | Time saved |
|---|---|---|---|
| $10,000 | $50 | $47,981 | 1 year 1 month |
| $25,000 | $125 | $112,053 | 2 years 7 months |
| $50,000 | $250 | $202,175 | 4 years 8 months |
| $100,000 | $500 | $338,658 | 7 years 10 months |
$600,000 owing at 6% with 30 years left, the offset balance held for the whole term, repayment unchanged, no fees. 6% is a round example rate, not today's.
The balance that matters is the one that stays there. Add $500 a month on top of the $50,000 and leave it, and the saving rises to $331,329, 7 years 8 months sooner. Money that arrives on payday and leaves by the end of the month still helps for the days it's there, but much less than the table suggests.
Offset vs redraw
The same saving, held in a different place.
A redraw facility lets you take back extra repayments you've already made into the loan. While the money is there, it saves interest the same way: $50,000 paid into redraw on the loan above saves the same as $50,000 in an offset. The differences are about access, cost and tax.
| Offset account | Redraw | |
|---|---|---|
| Where the money is | A separate account in your name, linked to the loan | Inside the loan, as extra repayments |
| Getting it back | Like any transaction account: card, transfer, direct debit | On the loan's terms: some lenders limit how much, charge a fee or delay access |
| What it costs | May come with a higher rate, account fees, or both | Set by the loan's terms; check for redraw fees and limits |
| Interest saved | The same, for as long as the money stays | The same, for as long as the money stays |
The tax difference, if the loan is or might become an investment. The ATO's ruling on redraw facilities says the deductibility of interest on money redrawn "depends upon the use to which the redrawn funds are put" (TR 2000/2, paragraph 22). So on an investment loan, extra repayments redrawn for something private make that part of the interest non-deductible. Money in an offset account sits in a separate account in your name, not in the loan, so taking it out isn't a redraw. If there's any chance the home becomes a rental, or the loan is for an investment property already, talk to a tax adviser before you choose; this page isn't tax advice.
Two cautions from Moneysmart: an ASIC review found some banks hadn't linked offset accounts properly, so check your statement shows the offset reducing the interest; and refinancing or switching products can break the link.
Is an offset worth it?
Only if the balance beats the cost.
At 6%, every $10,000 kept in an offset saves about $600 of interest in the first year. Set that against what the offset costs: an annual package fee, monthly account fees, or a higher rate than the same loan without one, which costs you on the whole balance, not just the offset part. Moneysmart's rule of thumb is that if your offset usually holds under about $10,000, it may not be worth paying for.
Where it does pay, an offset suits people who want their savings reachable: an emergency fund, money set aside for a renovation, or pay that passes through on its way to bills. If the money would only ever sit there, extra repayments into a cheaper loan without an offset can do the same job.
Types of mortgages and how they work: fixed against variable, and the other features worth paying for. Borrowing power calculator: what a lender would lend you, at the same rate this page starts from.
Questions
Common questions about offset accounts.
What is an offset account?
A transaction account linked to your home loan. Whatever is in it is subtracted from the loan balance before interest is worked out, so you pay interest only on the difference. It works like an everyday account: your pay can go in, bills can come out, and the money is yours to spend. Offsets mostly come with variable-rate loans.
How does an offset account work?
Interest on most home loans is calculated daily. Each day the lender takes the offset balance off the loan balance and charge interest on what's left. With $50,000 in the offset against a $600,000 loan, you're charged interest on $550,000. If your repayment stays the same, the interest you don't pay goes to the principal instead, and the loan finishes early.
How much does an offset account save?
It depends on the balance you keep in it, the rate, and how long is left on the loan. On a $600,000 loan at 6% with 30 years to go, keeping $50,000 in the offset for the whole term saves about $202,175 of interest and finishes the loan 4 years 8 months early. In the first month, that $50,000 saves $250. The calculator above does it on your numbers.
What's the difference between an offset account and redraw?
Both save interest the same way while the money is there. With redraw, you've made extra repayments into the loan itself and can take them back out, but some lenders limit how much, charge a fee, or delay access, and the terms are the lender's. With an offset, the money sits in a separate account that is yours, so it's simpler to reach. An offset may cost more, through a higher rate or fees.
Is an offset account worth it?
Only if you keep enough in it to beat what it costs. Lenders may charge for an offset through a higher interest rate, account or package fees, or both. Moneysmart's guide is that if your balance is usually under about $10,000, it may not be worth paying for. Compare the interest the calculator says you'd save in a year against the fee and any rate difference.
Does an offset account reduce my repayments?
Not in this calculator: it assumes your repayment stays the same, so every dollar of interest saved comes off the principal and the loan finishes sooner. A lower repayment would leave you with more cash each month but give back most of the time saved. How your lender sets the repayment is in your loan terms, so ask.
What this calculator assumes
Every assumption, in one place.
- Interest
- Calculated daily on the loan balance less the offset balance, never below zero, and charged monthly; each month is treated as a twelfth of a year
- Repayment
- Principal and interest on the balance and years you enter, unchanged by the offset, so the saving goes to principal
- Interest rate
- Fixed for the whole term. Starts at the median owner-occupier variable rate from HomePlanner's rates feed, read live (6.34% across 254 products on 10 October 2026 if the read fails)
- Offset balance
- Stays at what you enter, plus any monthly additions at the end of each month, and is never drawn down
- Fees
- Not included. An offset loan may carry a higher rate, account fees or a package fee
Each label links to the page it was checked against on 22 October 2026.