Home loans · Offset
Offset account calculator
The interest your offset balance saves, and how much sooner your home loan is paid off.
Arithmetic checked · rates are yours The interest rates are the ones you enter: no official schedule sets them.
Your tally
Interest saved over the loan
$251,508
Loan paid off 5 yrs 3 mos sooner: 19 yrs 9 mos instead of 25 yrs.
How it’s worked out
Interest accrues on $550,000 instead of $600,000 — 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.
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.
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 And if your home ever becomes a rental, money withdrawn from an offset never touches the loan, so the full loan stays tax-deductible.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: the ATO treats it as a new borrowing, judged by what you spend it on.
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 $600,000 loan
On a $600,000 loan at 6.2% with 25 years to run (a steady balance, nothing added monthly):
| Offset balance | Interest saved | Paid off sooner |
|---|---|---|
| $20,000 | $68,738 | 1 yr 5 mos |
| $50,000 | $155,093 | 3 yrs 3 mos |
| $100,000 | $266,641 | 5 yrs 7 mos |
| $150,000 | $349,933 | 7 yrs 4 mos |
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 — getting it back can depend on the lender’s consent and conditions, 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 for something private creates a mixed-purpose loan, where only the share used to produce income keeps its deduction (ATO ruling TR 2000/2).
Frequently asked questions
How does a mortgage offset account work?
Offset account vs redraw — what’s the difference?
Does an offset account reduce my repayments?
Is it better to put money in an offset or pay down the loan?
Are offset savings taxed?
Do offset accounts work on fixed-rate loans?
Keep tallying
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Redraw vs offset
The same interest saved either way; the difference is access, and tax once the loan is for an investment.
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Assumptions
Standard amortisation maths on a principal-and-interest loan with monthly compounding and a constant rate; 100% offset. The rate starts at 6.2%, the average on new owner-occupier variable home loans funded in August 2026 (RBA statistical table F6) — an average of loans written, not a quote for your loan. The engine behind this page is covered by automated accuracy tests — see the methodology. General information only — not financial advice.