See how much interest and time a mortgage offset account saves on your home loan. Every dollar in the offset is taken off the loan balance before interest is charged, so it earns, in effect, your home loan rate, tax-free. Keeping $50,000 in an offset against a $600,000 loan at 6.49% over 30 years saves about $233,655 in interest and pays the loan off 5 years and 1 month sooner, with the same monthly repayment of $3,788.46.
Offset Account Calculator
Interest and time saved on your home loan · Updated 13 October 2026
- Loan paid off sooner by
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- Loan paid off in
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- Monthly repayment (unchanged)
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- Interest without the offset
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- Interest with the offset
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- Interest saved in the first year
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- Savings rate needed to match
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Principal and interest, with the rate unchanged for the whole term. Interest is worked out monthly here; most lenders calculate it daily, which gives a very similar result. Account fees and any higher rate charged for an offset are not included.
How an offset account works
An offset account is an everyday transaction account linked to your home loan, usually a variable-rate loan. Your pay goes in, your bills come out, and whatever balance sits there reduces the amount you are charged interest on. With a $600,000 loan and $50,000 in the offset, interest is charged on $550,000.
- Your repayment stays the same, but because less of it goes on interest, more goes on the principal, so the loan shrinks faster.
- Most lenders work out interest daily on the loan balance minus the offset balance, so money that sits in the account for even part of a month helps.
- Unlike paying money into the loan, you can take the money out at any time, just like a normal bank account.
- Some loans with an offset charge a higher interest rate or a package fee. Moneysmart suggests an offset may not be worth paying for if your balance is usually low, for example under $10,000.
How much an offset saves
| Offset balance | Interest saved | Paid off sooner by | Saved in the first year |
|---|---|---|---|
| $10,000 | $56,632 | 1 year 2 months | $668.66 |
| $25,000 | $131,050 | 2 years 10 months | $1,671.64 |
| $50,000 | $233,655 | 5 years 1 month | $3,343.29 |
| $100,000 | $385,150 | 8 years 5 months | $6,686.57 |
| $200,000 | $569,372 | 12 years 6 months | $13,373.15 |
Adding to the offset makes a big difference. Saving an extra $1,000 a month into the same $50,000 offset raises the total saving to about $452,043 and clears the loan in 20 years and 1 month, almost 10 years early.
Offset versus a savings account
Interest from a savings account is taxed at your marginal rate, but the interest you avoid on your home loan is not income, so it isn’t taxed. To match a 6.49% offset, a savings account would need to pay 9.54% before tax if your marginal rate is 32% (30% plus the Medicare levy), or 12.25% if it is 47%. That is far more than any bank pays, which is why an offset usually beats a savings account for owner-occupiers.
| Marginal tax rate (2026–27, incl. Medicare levy) | Savings rate needed to match 6.49% |
|---|---|
| 17% | 7.82% |
| 32% | 9.54% |
| 39% | 10.64% |
| 47% | 12.25% |
Offset versus extra repayments
Putting $50,000 into the offset saves exactly the same interest as paying $50,000 straight off the loan, provided the money stays in the offset. The difference is flexibility: money in an offset is still yours to spend, while extra repayments may only be available through redraw, which some lenders limit or charge for. On the other hand, money that sits in an offset is easy to spend, and redraw is a little harder to dip into.
For an investment property, an offset is often the better choice: if you later move out of a home and rent it, keeping the loan balance high (with savings in the offset) can preserve your interest deductions. Get tax advice for your situation.
FAQs
Is the interest I save in an offset taxed?
No. You are not earning interest; you are paying less of it. That is why the calculator shows the before-tax savings rate you would need to do as well elsewhere.
What is a partial offset?
Some lenders offer an offset that only counts part of the balance, such as 40%. If yours does, multiply your balance by that percentage before you enter it.
How do I make sure my offset is working?
Check your statements or app to see that the interest charged is based on the loan balance minus the offset. ASIC found some banks had failed to link offset accounts properly, and refinancing or switching loans can break the link, so it is worth checking.
Related calculators
- Extra Repayments CalculatorInterest saved by paying more
- Home Loan Repayment CalculatorMonthly, fortnightly or weekly repayments
- Borrowing Power CalculatorHow much a lender may let you borrow
Sources
- Moneysmart (ASIC): Mortgage offset accounts
- Moneysmart (ASIC): Pay off your mortgage faster
- Reserve Bank of Australia: Cash rate target · 4.60% from 30 September 2026
- InDaily (AAP): Canstar average owner-occupier variable rate of 6.49% · 29 September 2026
- ATO: Tax rates for Australian residents · 2026–27 marginal rates
Figures current as of 13 October 2026
Each formula is checked against a separate test sheet with at least three worked examples. Results are estimates based on the numbers you enter and the published rules; your actual figures may differ. This is general information, not financial or tax advice.
Spotted a mistake? Contact us and we will fix it and update the date above.