Mortgage Offset Calculator

Your lender calculates interest each month on your outstanding loan balance minus whatever is sitting in your offset account. For example, if you owe $500,000 and have $30,000 in offset, you only pay interest on $470,000 that month. The loan balance itself does not change - only the amount interest is charged on shrinks, so every dollar you keep in offset works like a dollar of loan repaid, but you can withdraw it any time.

Both strategies reduce the interest you pay, but they differ in flexibility. With an offset account, your savings stay separate and fully accessible - you can withdraw at any time for any reason. Extra repayments go directly into the loan, reducing the balance permanently; to get that money back you need to use a redraw facility, which some lenders restrict or charge fees for. The calculator lets you compare both side by side to see which could save more interest over your loan term given the figures you enter.

Even a small balance helps, because interest is reduced by whatever is there each month. That said, many offset accounts come with an annual package fee - often around $395 per year - so there is a minimum average balance you need to maintain before the interest savings outweigh the fee. The calculator works out this break-even figure for your own numbers: as an example, with a $395 fee and a 6% rate you would need to keep around $6,600 in offset on average just to cover the fee. Keeping your salary in the account before spending through the month is one simple way to lift your average balance.

Yes - a 100% offset account is typically a transaction account linked to your home loan, so you can have your salary deposited into it and use a linked debit or credit card for everyday spending. The idea is to delay transferring money out for as long as possible: the longer cash sits in offset, the more interest you avoid. If you use a credit card for daily spending and pay the full balance from the offset on the due date rather than the transaction date, you can keep the cash working in offset for an extra few weeks each month, which the calculator estimates can add to your savings over the life of the loan.

This is an important distinction for investment properties. With an offset account, the loan balance on paper stays unchanged, so the ATO treats the full loan interest as potentially deductible against your rental income - only the interest actually charged (which is reduced by the offset) is what you claim. With extra repayments and redraw, there is a risk of what the ATO calls loan tainting: if you redraw money for a personal purpose such as a holiday or car, the interest on the redrawn portion may no longer be deductible. The figures in the tax panel are illustrative estimates only - your accountant or tax adviser makes the final call on your specific situation.

It often can, and the mechanism is simpler than it sounds. Paying half your monthly repayment every fortnight means 26 half-payments a year, which adds up to the equivalent of 13 monthly repayments instead of 12. That extra payment each year goes toward the principal, which can shorten your loan and reduce the total interest paid. The calculator shows the estimated interest saved and years potentially cut from your loan if you switch to fortnightly repayments, independent of any offset balance you hold.

A 100% offset account subtracts your full balance from the loan for interest purposes. Some lenders offer a partial offset, where only a set percentage of your savings counts - for example, a 40% offset means $30,000 in savings only offsets $12,000 of loan balance. This calculator models a 100% offset, which is a common arrangement with Australian lenders. If your loan has a partial offset arrangement, the actual interest savings will be lower than the figures shown here, so it is worth checking your loan product details and you may want to speak with a mortgage professional about what suits your circumstances.