How much can I save with an offset account in Australia?

Savings depend on your loan size, interest rate, offset balance, and term. On a $600,000 loan at 6.18% over 30 years, $50,000 in an offset account typically saves around $80,000–$100,000 in interest and cuts 3–4 years off the loan term.

Is an offset account better than making extra repayments?

Both reduce interest the same way. The key difference is accessibility: money in an offset account stays liquid — you can withdraw it any time. Extra repayments into a standard loan are often locked away unless you have a redraw facility. For most borrowers, an offset account offers the same interest savings with more flexibility.

What is the effective interest rate with an offset account?

The effective rate reflects the rate applied to your net balance (loan minus offset). If your loan rate is 6% and your offset covers 25% of the loan, the effective rate on the full loan is 4.5%. This calculator shows that figure so you can compare lenders and products accurately.

§ 02 — Loan

Mortgage Offset Account Calculator — Interest & Time Saved

Enter your home loan details and offset balance to see exactly how much interest you save and how many years you cut off your mortgage — with a live amortisation chart.

Updated · June 2026·Source: RBA · APRA·Read · 5 min

Your inputs

Loan amount

Offset balance

Interest rate

Loan term

yrs

Loan type

Principal & interest

Interest only

Assumes static offset balance. Inputs local — nothing sent anywhere.

The result

Interest saved with offset

$216,774

$50,000 offset · 6.18% · 30y

Monthly repayment: $3,973
Effective rate: 5.70%
Without offset: $780,142
Time saved: 4 yr 6 mo

§ Cumulative interest — with vs without offset

§ Year-by-year amortisation
Year	Balance (no offset)	Balance (offset)	Interest saved (cumul.)
5	$606,183	$588,134	$18,049
10	$546,549	$503,936	$42,613
15	$465,389	$389,343	$76,046
20	$354,931	$233,385	$121,546
25	$204,599	$21,583	$183,016
30	$0	$0	$216,774

Assumes offset balance is held constant throughout the loan. Real-world offset balances fluctuate — use this as a guide.

How the offset calculation works

A mortgage offset account reduces the balance your lender charges interest on. Every dollar sitting in the offset effectively earns a tax-free return equal to your mortgage rate — better than most savings accounts and without the tax hit on interest earned.

This calculator runs a full month-by-month amortisation for both the base loan and the offset scenario. The offset balance is held constant (a conservative assumption — in practice, growing savings amplify the benefit). The chart above shows cumulative interest charged over the life of the loan, letting you see the divergence build year by year.

Why the monthly repayment stays the same

An offset account does not reduce your scheduled repayment — it reduces the interest component of that repayment. With less interest to service, more of each payment goes toward principal. That is why P&I loans pay off faster: the principal falls quicker, which reduces future interest, compounding the savings over time.

Offset vs extra repayments — what is the difference?

Mathematically, the interest reduction is identical. The practical difference is liquidity: money in an offset account can be withdrawn any time (for an emergency, investment opportunity, or renovation) without triggering a redraw fee or lender approval. Extra repayments directly into the loan principal are harder to access and, on fixed-rate loans, sometimes impossible.

How much can you realistically save?

On a $650,000 loan at 6.18% over 30 years, keeping a steady $50,000 in offset saves roughly $90,000 in interest and cuts around 3.5 years off the term. Bump that to $100,000 in offset and the savings grow to approximately $165,000 with almost 7 years shaved off.

Interest-only loans and offset accounts

Offset accounts work on IO loans but the mechanics differ. Because the principal is not reducing, the offset only cuts your monthly interest bill — it does not shorten the term. When the IO period ends and the loan rolls to P&I, the full original principal is still outstanding. Use this calculator in IO mode to model the interest cost during that period.

Interest saved · $650k · 6.18% · 30y · P&I

Offset balance	Interest saved	Years saved
$20,000	~$38,000	~1.4 yr
$50,000	~$90,000	~3.5 yr
$100,000	~$165,000	~6.8 yr
$150,000	~$230,000	~9.8 yr
$200,000	~$286,000	~12.6 yr

Indicative · static offset balance · big-four avg 6.18%

§ Letters & replies

Offset accounts, answered.

Questions Australians ask most about offset accounts and home loan interest savings.

How does a mortgage offset account work?+ open

An offset account is a transaction account linked to your home loan. The balance is 'offset' against your outstanding loan when calculating daily interest. If you have a $600,000 loan and $50,000 in offset, you only pay interest on $550,000 — every single day. The effect compounds over decades, slashing total interest and shortening the loan term.

Is an offset account better than extra repayments?+ open

Both reduce interest identically. The key difference is flexibility: money in an offset account stays accessible — you can withdraw it for emergencies or opportunities without a redraw process. Extra repayments are harder to recover, especially on fixed-rate loans. For most borrowers, offset is the smarter choice.

Does an offset account work with interest-only loans?+ open

Yes, but the benefit is different. On an IO loan the offset reduces your monthly interest bill — but it does not shorten the term because no principal is being repaid. Use the calculator in IO mode to see the interest saving during your IO period.

What is the effective interest rate with an offset?+ open

The effective rate is the rate applied to your net balance (loan minus offset), expressed as a percentage of the full loan. A 6% loan with $100k offset on a $500k balance has an effective rate of 4.8% — a useful benchmark when comparing lenders that offer different offset features.

Are there any downsides to an offset account?+ open

Offset accounts are typically available on variable-rate loans and some split loans. They usually come with a higher headline interest rate than bare-bones loans — sometimes 0.1%–0.3% more. There may also be a monthly account fee. Run the numbers: if the extra rate cost exceeds your projected interest saving, a cheaper loan with extra repayments may win.

How much should I keep in my offset account?+ open

As much as you can without compromising your cash-flow buffer. A common rule of thumb is to keep at least 3–6 months of living expenses accessible regardless. Beyond that safety margin, every dollar in offset saves you your mortgage rate — currently around 6% — tax-free, which outperforms most savings accounts after tax.

Next: more home loan tools