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Offset Account Calculator

See what money held in an offset account does to the interest on your loan, compared with leaving it in savings.

Indicative only · not an offer of credit

The loan

What you owe today.

From your statement. The figure loaded here is an editable placeholder, not a rate on offer.

The offset account

Money already sitting in the offset account, including the buffer you keep for emergencies.

What you can leave in there and not touch. Set it to zero to see what today's balance alone is worth.

Offset and redraw are not the same thing

An offset is a separate transaction account. The money stays yours, it stays liquid, and the lender simply does not charge interest on the part of the loan it covers. Redraw is different: the money has already been paid into the loan, and taking it back is a request the lender may limit, delay, price, or refuse. In a tight month that distinction is the whole thing.

There is a tax dimension too. Because offset money is never repaid into the loan, withdrawing it does not change the loan’s purpose — which can matter a great deal if the property later becomes an investment. Redrawing can. That is a question for your accountant or a registered tax agent, not for a calculator and not for us.

Not every account labelled offset is a genuine one. Some are partial, some offset only a share of the balance, some apply only to the variable portion of a split loan, and some carry a monthly or annual fee that eats the benefit at small balances. What yours actually does is a question about your specific product.

Assumptions
  • A full 100% offset against a principal and interest loan, with the rate held at 6.00% for the whole term. Partial offsets and split loans will do less than this.
  • Interest is calculated once a month on the loan balance less the offset balance. Loans that calculate interest daily will differ slightly, and a balance that moves during the month will differ more.
  • The repayment stays at the scheduled amount for the original term, $3,544 a month. The saving therefore shows up as a shorter loan, not a smaller repayment.
  • The monthly contribution goes in every month and is never withdrawn. Real offset balances rise and fall with the household, which reduces the benefit.
  • Account fees, package fees and any charge for holding the offset are not included. On a small offset balance an annual package fee can cancel out the saving entirely.
  • Interest earned on savings elsewhere, and the tax you would pay on it, are not compared here.
  • The loan keeps running until the balance reaches zero. The month your offset first covers the balance is shown separately, because at that point you could choose to close the loan out instead — that is a decision, not something that happens automatically.
  • The effective rate is the constant rate at which the same loan, paid the same amount each month, would clear in the same time. It is a way of reading the result, not a rate on any product.

Interest saved over the term

$179,468

The loan clears 4 years 2 months early, on the same repayment.

Scheduled repayment, monthly
$3,544
Interest without an offset
$513,097
Interest with the offset
$333,630
Original term
25 years
Loan cleared in
20 years 10 months
Time saved
4 years 2 months
Effective interest rate
4.99%
Offset balance when the loan clears
$145,000
Offset first covers the balance
17 years 10 months
Interest without an offset$513,097
Interest with the offset$333,630
Original term25 years
Term with the offset20 years 10 months

At around 17 years 10 months the offset balance matches what you owe. From that point the loan costs no interest at all, and you could close it out instead of continuing to pay it down. Whether that is the right move depends on what else you would do with the money.

This assumes the money stays put. An offset only works while the balance is sitting there, so a real household that dips into it will save less than this. It also assumes a genuine full offset — worth confirming against your own loan documents.

Two questions decide whether this is worth having: is your account a genuine full offset, and does the fee for holding it cost less than the interest it saves. We will read your loan documents and tell you which side of that line you are on.

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How to read the result

An offset account is a transaction account linked to your loan. The balance sitting in it is subtracted from the loan balance before interest is calculated. Hold money there and the loan behaves, for interest purposes, as though it were that much smaller.

The two figures to look at

  • Interest saved over the life of the loan, assuming the offset balance holds.
  • Time saved, since the repayment stays the same and more of it goes to principal.

Why an offset often beats a savings account

Interest saved on a loan and interest earned on savings are not the same thing after tax. Savings interest is generally assessable income. Interest you avoid paying is not income at all. That difference is why the same dollar frequently works harder in an offset. How it applies to your circumstances is a question for a registered tax agent.

The assumptions behind the number

  • The offset balance you entered is held for the whole period. In real life it rises and falls with the household.
  • The account is a full offset, so every dollar counts against the loan balance.
  • Interest is calculated daily on the net balance and charged monthly, which is the common arrangement.
  • The loan rate holds.
  • Repayments continue at the same amount rather than being reduced.
  • No account or package fee is deducted unless you entered one.

If your offset balance moves a lot through the month, enter your realistic average rather than the peak. The saving is calculated on the daily balance, not on the best day of the month.

What it does not account for

  • Package or account fees charged for the offset facility, which can outweigh the benefit on small balances.
  • Partial offset accounts, where only a portion of the balance is counted.
  • Limits on offsets attached to fixed rate loans, which are often unavailable or restricted.
  • Whether the loan rate itself is higher because the offset is included.
  • Your tax position, including any effect on deductibility for investment or business borrowings.
  • The behavioural question of whether the money stays there.

Do the fee arithmetic before assuming an offset is worthwhile. There is a balance below which the annual package fee costs more than the interest the offset saves, and lenders do not volunteer where that line sits.

How a lender's terms and assessment differ

  • Not every loan offers a full offset, and some offer several linked accounts while others allow one.
  • An offset balance does not usually improve borrowing power. Lenders assess the loan limit, not the net balance.
  • Redirecting funds out of an offset attached to an investment loan can affect the deductible portion of interest. Speak to a registered tax agent before restructuring.
  • Offsets on fixed rate loans, where available, are frequently partial or capped.
  • Some products call a redraw facility an offset. They behave differently, particularly for tax purposes and for access.

For business owners, an offset is often the cleanest place to hold the money set aside for the next BAS. It works while it waits, and it stays available on the day the liability falls due. That is a small structural change that removes a recurring source of pressure.

What to do next

  1. 01Check whether your current loan has a full offset, a partial one, or a redraw facility described as an offset.
  2. 02Compare the annual fee against the interest the offset would actually save at your realistic balance.
  3. 03Route your income into the offset and spend from a card paid in full each month, if that suits your discipline.
  4. 04Hold tax and BAS provisions there rather than in a separate savings account.
  5. 05If your loan does not offer one and the numbers justify it, look at what a refinance would cost.

We can compare offset structures across the panel and tell you plainly whether the fee earns its place on your balance.

FAQ

Questions people actually ask

If yours is not here, ask it. We would rather answer the awkward one early than have you find out later.

1300 015 267
Is the saving shown here guaranteed?
No. It is indicative, based on the balance and rate you entered holding steady. It is not an offer of credit or a quote, and your actual saving depends on your daily offset balance, your loan contract and your lender's fees.
What is the difference between an offset and redraw?
An offset is a separate transaction account whose balance reduces the interest calculation. Redraw is money already paid into the loan that the lender may allow you to take back. They differ in access, in lender discretion and often in tax treatment.
How much do I need in an offset for it to be worthwhile?
Enough that the interest saved exceeds any package or account fee. That threshold depends on the fee and the rate, so run the comparison at your realistic average balance rather than your best month.
Can I have an offset on a fixed rate loan?
Sometimes, but it is often partial, capped or unavailable. Splitting a loan into fixed and variable portions with the offset against the variable part is a common way around it.
Does an offset increase how much I can borrow?
Generally no. Lenders assess servicing against the loan limit rather than the net balance, so an offset helps your cost, not your capacity.
Can I have more than one offset account?
Some lenders allow several linked accounts, which people use to separate a tax provision, an emergency buffer and everyday spending. Others allow one. It is a product feature worth asking about before you settle.
Is an offset better than paying extra off the loan?
The interest effect is similar. The offset keeps the money accessible, an extra repayment does not always. Where a business needs liquidity, the offset is usually the better structure.
Does an offset affect my tax?
It can, particularly on investment or business borrowings where moving money can change the deductible portion of interest. This is a question for a registered tax agent, not for a broker or a calculator.

Credentials

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  • ABN 20 672 801 651
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  • AFCA external dispute resolution

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Understand the mechanism

A calculator cannot see your whole file.

It works from what you typed. We work from what a lender will actually assess — and we would rather tell you the real answer early.

Or call us

1300 015 267

Monday – Friday, 09:00 to 17:30

Dave Pham, Head Broker at WeL'nd

“Tell me the number. I have almost certainly seen worse.”

Dave Pham · Head Broker

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