Loan Details
Offset Account
Lump Sum Additions (optional)
How Offset Accounts Work
- •Interest is calculated daily on your loan balance minus your offset balance — reducing what you owe interest on.
- •Use your offset as your main transaction account — every dollar sitting there saves you mortgage interest (often 6%+ p.a.).
- •100% offset means $1 in the account = $1 off the loan balance. Partial offsets only count a percentage — check your product disclosure.
- •Watch for account fees — an offset with a $400/yr fee needs to save at least that much in interest to be worthwhile.
Interest Saved with Offset
$216,493
Monthly repayment: $3,958/mo · 6.25% p.a. · 25-year term
Total Interest (with offset)
$370,912
over 20yr 6mo
Total Interest (no offset)
$587,405
over 25yr
Time Saved
4yr 6mo
off loan term
Loan Paid Off In
20yr 6mo
vs 25yr without
Interest Reduction
36.9%
of original total interest
Effective Rate
6.03%
vs 6.25% nominal
Key Figures
Loan Balance Over Time
Calculations are estimates based on a standard P&I loan with a 100% offset account and constant interest rate. Results will vary with variable rates, redraw use, or partial offset products. Not financial advice. Terms of Use.
How does an offset account save interest?
An offset account is a transaction account linked to your home loan. Each day, the bank calculates interest on your loan balance minus whatever is in your offset. If you have a $500,000 loan and $30,000 in the offset, you only pay interest on $470,000. Over a 25-year term that difference compounds significantly — often saving tens of thousands of dollars.
Should I use my offset as a transaction account?
Yes — this is one of the highest-return strategies available to Australian mortgage holders. Every dollar sitting in your offset instead of a savings account earns the equivalent of your mortgage interest rate, tax-free, because it reduces interest rather than earning taxable income. With rates above 6%, that easily beats most savings accounts after tax.
100% offset vs partial offset — what's the difference?
A 100% offset account means every dollar in the account reduces your loan balance dollar-for-dollar. A partial offset (e.g. 40%) only offsets that percentage. Most modern variable-rate home loans offer a 100% offset — but always check the product disclosure statement and watch for monthly fees that can erode the benefit.
What about redraw vs offset?
Redraw lets you access extra repayments you've already made on the loan, while an offset is a separate account you control freely. Both reduce interest, but offsets offer more flexibility — funds are accessible like a normal bank account with no redraw fees. For investment properties, an offset may also have tax advantages — consult your accountant.