📉 Offset Account Calculator
See how much interest and how much time an offset account saves on your home loan.
Results
Balance by year
| Year | Loan balance (no offset) | Loan balance (with offset) | Interest saved |
|---|
How a bigger offset changes things
| Offset balance | Interest saved | Paid off sooner |
|---|
Estimates only. Assumes a fixed interest rate for the whole loan, interest charged on the loan balance less the offset balance, the same contractual repayment with and without the offset, and that the money in the offset stays there for the life of the loan. Balances in the table are the loan balance only — the money in the offset is still yours and is not deducted from it. Fees, rate changes, redraw limits, any cap your lender puts on offset balances, and interest paid on the offset balance itself are not included. Weekly repayments are the monthly repayment ÷ 4 and fortnightly ÷ 2. Your actual saving will differ. This is not financial or tax advice.
Why use this calculator?
An offset account is the quietest trick in home lending: the money in it is still yours to spend, but the lender charges interest on the loan balance minus that money, so it works like a repayment you can take back. This calculator shows what a balance in the offset is worth over the life of a loan — the interest it saves and the months it takes off the end — which is the figure an offset has to beat the package fee it usually comes with.
Where offset accounts come from
Offset accounts are an Australian and British habit rather than a global one, and the money in them behaves in a way that surprises people:
- The flexible mortgage, with the offset as its best-known feature, first appeared in Australia in the early 1990s and only took off late in the decade. It is common in Australia and the United Kingdom and unusual in the United States, where the idea is still known as an Australian mortgage.
- Money in an offset saves interest rather than earning it, so there is no interest income to declare: the benefit arrives as a smaller loan instead. Lenders in the UK market offsets as tax-efficient for exactly that reason.
- The saving compounds. On this page’s default loan — $500,000 at 6% over 30 years — $30,000 held in the offset for the whole term cuts the interest from $579,191 to $450,873. That is $128,318 saved, more than twice the $54,000 that 6% a year on $30,000 comes to as simple arithmetic, because the interest never charged is never charged again. The loan also ends 3 years 6 months sooner.
How does this calculator work?
Interest is charged on the loan balance less the offset balance, each period:
interest = (loan balance − offset balance) × r
where r is the yearly rate ÷ 100 ÷ repayments per year. The loan is then walked through period by period twice — once with an offset balance and once without — at the same rate and the same agreed repayment, so the only thing that differs between the two runs is the money sitting in the offset.
- Each period the interest is worked out on the smaller balance, and whatever is left of the repayment pays the loan down. The repayment itself never changes.
- The offset grows by the amount you pay into it each month, so a balance that keeps growing saves more as the years go on.
- The saving shows up as less interest charged and as the loan finishing sooner. The headline figure is the interest saved; the line under it says how much earlier the loan ends.
- The balances in the table are the loan balance alone. The money in the offset is still yours and is not deducted from it.
- Weekly repayments are the monthly repayment ÷ 4 and fortnightly ÷ 2, the same in both runs, so the comparison stays like for like.
- The "how a bigger offset changes things" table runs the same loan with a few offset balances ($0 to $200,000 and your own) so the relationship between the balance and the saving is easy to see.
Frequently asked questions
Is the money in an offset account still mine?
Yes. It sits in your own account and you can take it out whenever you like — the lender simply works out the interest on the loan balance less whatever is in the offset. This page assumes the balance stays there for the life of the loan, because spending it takes the saving with it.
Why does the saving grow faster as the years go on?
Because the saving is charged interest too, in a sense. Less interest charged this period means more of the repayment goes to the balance, which means less interest next period, and so on for the rest of the loan. The first year's saving is the smallest one; it keeps working for every year that is left.
Why is the saving more than the offset balance × the interest rate?
That multiplication is roughly one year of saving. On a 30-year loan the same money keeps saving every year, and each year's saving reduces the balance that later interest is worked out on, so the figure at the end is much larger than a single year's worth.
Is an offset better than a redraw?
This page does not model a redraw. The arithmetic is close to the same — money sitting against the loan reduces the interest — and the difference is practical: an offset is a separate account in your name, while redraw is money you have already paid into the loan, which some lenders restrict or take away if the loan falls behind.
Does it count what the money could earn if it were invested instead?
No. Money parked in an offset earns no interest, so there is nothing to add; the return is the interest it saves you, and that saving is not income in the way interest earned in a savings account is. How any of it is treated for tax is a question for your accountant, not this page.
What if the offset covers the whole loan?
Then no interest is charged at all, and the page says so rather than showing a saving of nothing. Your repayments still come out, and every one of them goes straight onto the balance, so the loan finishes quickly and the result is measured in months.
Do all offsets work like this one?
No. Some lenders cap how much of the loan can be offset, some only offer it on a package with an annual fee, and some pay no interest on the offset balance itself. None of that is in here, so read the offset balance as the money that actually gets offset.
What does the share button actually send?
The sentence on the result card and a link to this page, and nothing else. The site sends nothing anywhere by itself: the button hands that sentence to your own device’s share sheet, or puts it on your clipboard when the device has no share sheet to offer. What you do with it after that is between you and whichever app you picked.