Is an offset better than a savings account?

Usually yes. You 'earn' at the loan rate (e.g. 6%) tax-free by reducing interest, whereas savings interest is often taxable. Loan rates are typically higher than HISA rates, so the offset usually wins.

Does offset reduce my repayment?

Usually no. The repayment stays the same; more of it goes to principal, so you pay off the loan faster and pay less total interest.

What if I have a redraw instead?

Redraw lets you pay extra off the loan and redraw later. The interest saving is similar. Offset is often more flexible (instant access like a transaction account).

Offset Account Calculator

See how much interest you save by keeping savings in an offset account

Interest is charged on your loan balance minus your offset balance. Same repayment each month — more goes to principal when you have an offset, so you pay off the loan faster and save interest.

Loan & offset

Enter your loan balance, rate and term, and how much you keep in the offset. We assume the offset balance stays constant and the same repayment is made each month.

Loan balance ($)

Interest rate (% per annum)

Remaining term (years)

Offset account balance ($)

Money in your offset reduces the balance on which interest is calculated. Same repayment amount each month.

Compare to savings rate (% per annum) — optional

If you put the same money in a savings account instead, you'd earn this much interest. Offset usually wins because loan rates are higher than HISA rates.

Impact of your offset

Same repayment each month; interest is charged only on (loan balance − offset).

Monthly repayment$3,376

Total interest (no offset)$512,811

Total interest (with offset)$350,027

Interest saved$162,784

$96,919 in today's dollars

Time to pay off with offset21 years

Years saved4.0 years

Effective rate with offset3.33%

If you put the same money in a savings account

A savings account at the rate you entered would earn about $78,414 in interest over the same period, before any tax on that interest. The offset saves $162,784 on the loan instead. On these figures, the offset leaves you $84,370 ahead of the savings account. Interest saved on a loan is not taxable income, while savings account interest is — this comparison is before that tax, so the gap after tax could be different from what is shown here.

How to Use This Calculator

1Enter your current loan balance and interest rate
2Enter the remaining term in years
3Enter how much you have (or plan to keep) in the offset account
4Optionally add a savings rate to compare offset savings vs HISA earnings

What is an offset account?

An offset account is a transaction or savings account linked to your home loan. The balance is 'offset' against your loan — you're charged interest only on (loan balance minus offset balance). Your repayment amount usually stays the same, so more of each payment goes to principal and you pay off the loan faster.

Not all loans have offset; full offset is most valuable. Some products offer partial offset (e.g. 50%). This calculator assumes 100% offset.

Why use an offset?

Tax-free benefit: Interest saved is like earning the loan rate tax-free, which beats most savings accounts after tax for many people.
Flexibility: You can withdraw from the offset anytime without changing the loan (unlike extra repayments).
Same repayment: Lenders typically keep your repayment the same; the loan just pays down faster.

Things to know

•We assume your offset balance stays constant; in reality it may vary.
•Compare loan products: not all offer full offset, and some charge a fee or higher rate for offset.
•If your offset exceeds the loan, you're not charged interest on the loan; any extra is just sitting in the account.

Frequently Asked Questions

Official Sources

Moneysmart – mortgage offset accounts

Estimates only. Not financial or tax advice. Full disclaimer for your rights and our limitations of liability.

About this calculator

This calculator exists to show you the arithmetic. It applies published Australian rates, thresholds and formulas to the numbers you enter and shows the working, so you can check it. That is all it does — it produces a number and describes what the number is. It does not recommend anything and it holds no opinion about any financial product.

What can move this result

It only knows the figures you type in. Offsets, deductions, prior-year losses, other income, your partner's position and anything you have not entered are not in the result, and any of them can move it a long way.
Rates and thresholds change, sometimes mid-year and occasionally with retrospective effect. Each calculator shows the financial year and the verification date it is working from — outside that year the result is wrong rather than approximate.
Assumptions are set to a reasonable default and every non-statutory one can be changed. Defaults are not predictions, and a small change to a growth or inflation assumption compounds into a large change in a long projection.
Where a result reaches two or more years into the future it is shown in today's dollars as well as future dollars, because a future-dollar figure overstates what the money will actually buy.
It is a generic calculator. It is not built around any particular product, it does not compare the market, and it cannot tell you whether a product is suitable for you.

This calculator is not intended to be relied on for the purposes of making a decision in relation to a financial product. Before you make a financial decision, consider obtaining advice from someone who holds an Australian Financial Services Licence. We do not, and we cannot advise you.

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About this calculator

What can move this result

It only knows the figures you type in. Offsets, deductions, prior-year losses, other income, your partner's position and anything you have not entered are not in the result, and any of them can move it a long way.
Rates and thresholds change, sometimes mid-year and occasionally with retrospective effect. Each calculator shows the financial year and the verification date it is working from — outside that year the result is wrong rather than approximate.
Assumptions are set to a reasonable default and every non-statutory one can be changed. Defaults are not predictions, and a small change to a growth or inflation assumption compounds into a large change in a long projection.
Where a result reaches two or more years into the future it is shown in today's dollars as well as future dollars, because a future-dollar figure overstates what the money will actually buy.
It is a generic calculator. It is not built around any particular product, it does not compare the market, and it cannot tell you whether a product is suitable for you.