How much could an offset save me?
Model how cash sitting in your offset account reduces lifetime interest and shortens your loan.
Add your offset balance
Updates as you type. Numbers stay in your browser.
Your typical balance — not your peak. Money flows in and out of an offset account; this is your average over time.
Net amount you add to offset each month (savings minus withdrawals).
Some "offset" accounts only partially offset. We'll find a 100% offset loan that matches your situation.
How offset accounts actually work
An offset account is a transaction account linked to your home loan. The lender calculates interest each day on your loan balance minus the balance sitting in your offset. So if you owe $500,000 and have $20,000 in your offset, you only pay interest on $480,000 — even though you can still spend the $20,000 whenever you like, with EFTPOS, BPAY, transfers, the lot.
The clever part: the saving compounds. Every dollar of interest you don't pay this month means slightly more of next month's repayment goes to principal, which reduces interest the month after that, and so on. Over a 25- or 30-year loan, modest offset balances translate to tens of thousands in lifetime savings.
Offset vs redraw — they're not the same
Both reduce your interest by the same amount today. The difference is structural:
- Offset — a separate transaction account. Your money is your money. You can spend it, transfer it, deposit your salary into it.
- Redraw — a notional pool of "extra repayments you've made". Pulling money out is technically a re-borrow, with potential tax implications on investment loans.
For owner-occupiers, the practical difference is minor. For investors, it's important: redrawing money for non-investment purposes can taint the loan's tax deductibility, while offset balances never do.
"100% offset" matters
Some loans offer "partial offset" — your offset balance only offsets part of the interest, or only earns a reduced rate of offset. Always ask if the offset is 100% (a dollar in offset = a dollar off the interest-charging balance). Many cheap, basic-variable loans don't offer offset at all, which is fine if you don't need it but a missed opportunity if you'd carry a meaningful balance.
The break-even on package fees
Many offset-eligible loans come with a $395/year package fee. The fee is worth it if you carry an average offset balance above roughly $6,500 (at a 6% rate). Below that, a no-frills loan is cheaper overall. If you'd hold $20,000+ in offset most of the time, the package easily pays for itself.
Offset accounts, explained.
What is an offset account?
A transaction account linked to your home loan. The balance sitting in offset reduces the portion of your loan the lender charges interest on, while remaining fully accessible — you can use the money any time.
Is offset better than redraw?
Day-to-day they save the same interest. Structurally they differ — offset keeps your money in a separate account; redraw is a pool of extra repayments you can pull back. For investors, offset is usually preferred for tax reasons. For owner-occupiers, either works.
Are offset accounts free?
Not always. Common to be bundled in a ~$395/year package, or come with a slightly higher rate. Worth it if you'd carry $6,000+ in offset on average; not worth it for smaller balances.
Should I use offset or just pay down the loan?
Offset preserves liquidity. If you want your money to stay accessible (emergency fund, near-term goals), offset is better. If you're confident you won't need the money, direct extra repayments achieve the same saving without a separate account to manage.
Can I have offset on a fixed-rate loan?
Sometimes — a few lenders offer "offset" on fixed-rate loans, but it's usually capped or partial. Most full-feature offset accounts attach to variable loans only. Splitting the loan (part fixed, part variable) is a common way to get the best of both.