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Australia Offset Account Calculator

See how much interest you could save — and how many years sooner your home loan could be paid off — by keeping savings in an offset account linked to your loan.

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Savings held in a 100% offset account linked to this loan. Assumed constant for the life of the loan for this illustration.

Interest you'd save$194,606.16
Years shaved off the loan5.3 yearsPaid off in 296 months instead of 360
Standard monthly payment$2,997.75Unchanged by offsetting — only the balance interest is charged on shrinks
Total interest without offset$579,190.95
Total interest with offset$384,584.78

How this calculator works

In a 100% offset account, your linked savings are deducted from your loan balance before interest is calculated each month — you earn no interest on the offset savings, but you avoid paying loan interest on an equivalent amount. This calculator builds two full month-by-month simulations at the SAME scheduled repayment amount — a standard loan and one with the offset balance applied — and compares the total interest and payoff time:

Monthly interest = (loan balance − offset balance) × monthly rate

Because less interest is charged each month, more of your fixed repayment goes to principal — so the loan is paid off earlier, and total interest paid falls, rather than your monthly repayment amount changing.

Worked example

Take a $500,000 loan at 6% over 30 years, with $50,000 held constantly in a linked offset account. Interest is calculated each month on only $450,000 of the balance rather than the full $500,000, so more of your unchanged monthly repayment reduces the principal — resulting in a meaningful reduction in total interest paid and a noticeably earlier payoff date compared with the same loan without an offset account.

What affects your result

  • Offset balance size — the biggest lever; a larger constant offset balance saves proportionally more interest.
  • Your interest rate — the higher your rate, the more each dollar of offset balance saves you in interest.
  • Loan term remaining — a longer remaining term gives the offset effect more time to compound into total interest savings.
  • Whether your balance grows over time — this calculator assumes a constant offset balance; a growing balance (as you save more) would produce even greater real-world savings than shown here.

A note on accuracy

This calculator computes both schedules on full, unrounded figures and only rounds for display. It assumes a 100% offset facility (not a partial offset) and a constant offset balance for the life of the loan — a simplifying assumption that keeps the illustration clear, though your real savings will vary if your balance fluctuates. For general guidance on offset accounts, see Moneysmart — Offset accounts.

Frequently asked questions

How does an offset account work in Australia?

A 100% offset account is a savings or everyday transaction account linked to your home loan. Its balance is deducted from your loan balance before interest is calculated each period — so if you have a $500,000 loan and $50,000 in your offset account, you're only charged interest on $450,000. You earn no interest on the offset savings themselves, but you avoid paying loan interest on an equivalent amount, which is typically more valuable since loan interest usually isn't tax-deductible on an owner-occupied home while savings interest is taxable income.

Does my monthly repayment go down if I use an offset account?

No — this is a common misconception. Your scheduled monthly repayment stays the same; what changes is how much of each repayment goes to interest versus principal. Because less interest is charged (thanks to the offset), more of each fixed repayment reduces the principal balance, so the loan is paid off FASTER and total interest paid falls — rather than your monthly repayment amount falling.

What's the difference between an offset account and a redraw facility?

Both reduce the interest you pay, but they work differently. An offset account is a separate, fully accessible transaction account — your money stays completely liquid and separate from the loan. A redraw facility lets you access EXTRA repayments you've already made directly on the loan itself, which can sometimes be less flexible, have withdrawal limits or fees, and — for investment properties — can complicate the tax deductibility of loan interest if you redraw for a private purpose. See our Extra Repayments Calculator to model a redraw-style strategy.

Is an offset account only available on variable-rate loans?

Full 100% offset accounts are most commonly available on variable-rate home loans in Australia. Some lenders offer a partial offset facility on fixed-rate loans, but it's less common and often capped at a lower percentage. Always check with your specific lender which offset arrangement applies to your loan type.

How much interest could I save with a $50,000 offset balance?

It depends on your loan amount, rate, and term, but on a $500,000 loan at 6% over 30 years, a constant $50,000 offset balance can save a meaningful five-figure sum in total interest and shave a noticeable amount of time off the loan — enter your own numbers into the calculator above for an exact figure.

Does this calculator assume my offset balance grows over time?

No — for simplicity, this calculator holds your offset savings balance CONSTANT for the life of the loan, rather than simulating it growing or shrinking month to month as you save or spend. This is a reasonable approximation for illustrating the effect of a given offset balance, but if you expect your savings to grow substantially over time, your real interest saving would likely be even higher than this estimate.

Related calculators

Mortgage Repayment CalculatorWork out your monthly repayment and total interest.Extra Repayments CalculatorCompare offsetting against making extra repayments directly.Refinance CalculatorCompare your current deal against a new rate.

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