Is an offset account worth the extra cost?

If you maintain a balance of at least $20,000-$30,000, the interest savings typically outweigh any additional fees. At 6% interest, $50,000 in offset saves about $3,000 per year in interest.

What's the difference between offset and redraw?

An offset account is a separate bank account - your money stays accessible. Redraw means making extra payments into the loan that you can withdraw later, but the lender controls access and may limit redraw amounts.

Does offset work with fixed rate loans?

Generally no - offset only works with variable rate loans. Some lenders offer partial offset on fixed loans, but it's rare. This is why split loans are popular - you can offset against the variable portion.

Offset Account Calculator

Calculator

Calculate how much an offset account can save you in interest on your home loan

Free to useNo data storedAI insightsUpdated: February 2026

An offset account is like a savings account linked to your home loan. The balance offsets your loan, meaning you only pay interest on the difference. If you have a $500,000 loan and $50,000 in offset, you only pay interest on $450,000. This can save you thousands over your loan term.

Enter Your Details

Real-World Examples

Salary Worker with Savings Buffer

Nina has a $550,000 loan at 6.3%, and keeps a consistent $40,000 emergency fund in her offset.

Inputs Used:

loanAmount:550,000interestRate:6.3loanTerm:30offsetBalance:40,000monthlyDeposit:0

Interest saved: $63,000 over the loan life. Loan paid off 3 years earlier. The $40,000 effectively earns 6.3% tax-free.

Building Offset Over Time

Tom starts with $10,000 in offset but adds $1,500 per month to his $480,000 loan at 6.5%.

Inputs Used:

loanAmount:480,000interestRate:6.5loanTerm:28offsetBalance:10,000monthlyDeposit:1,500

After 5 years, offset balance reaches $100,000. Total interest saved: $142,000. Loan paid off 8 years early.

Frequently Asked Questions

Glossary

Offset Account

A transaction account linked to your mortgage. The balance reduces the loan amount interest is calculated on.

100% Offset

The full balance in your offset account is deducted from your loan when calculating interest. More common than partial offset.

Partial Offset

Only a percentage (e.g., 40%) of your offset balance reduces the interest calculation. Less beneficial than 100% offset.

Tax-Free Return

Offset savings aren't taxable income - equivalent to earning your interest rate tax-free, which beats most savings accounts.

Related Tools

Compare with Extra Repayments

See if making extra repayments might work better for your situation.

Calculate Your Repayments

Understand your baseline repayments before adding offset benefits.

Explore Split Loans

Consider splitting to get both fixed security and variable offset benefits.

How to Use

1Enter your current loan balance
2Input your interest rate
3Enter your loan term
4Add your expected offset account balance
5Optionally add a monthly deposit amount
6See your interest savings

Key Information

Offset accounts effectively earn your loan interest rate tax-free
100% offset accounts reduce interest on the full balance
Offset beats regular savings because savings interest is taxed
Keep your salary and savings in offset for maximum benefit

Pro Tips

Have your salary paid directly into your offset account - every day your money sits there saves interest
Even short-term parking of funds (like bills money until due) provides offset benefit
Multiple offset accounts are offered by some lenders - useful for budgeting while still offsetting
Offset works better than extra repayments if you might need access to the funds later

Avoid These Mistakes

Not considering the annual offset account fee vs the interest savings - do the math
Keeping money in a regular savings account when it could be in offset (offset usually wins)
Choosing partial offset (25-50%) when 100% offset is available for similar fees
Forgetting that offset only works with variable rate loans - fixed portions don't offset

Disclaimer: This calculator provides estimates only and should not be relied upon for financial decisions. Interest rates, fees, and policies change frequently. Always verify information with lenders directly. This is general information, not personal financial advice. Consider seeking advice from a licensed mortgage broker or financial advisor.

Last updated: February 2026