Offset Account Calculator

How a 100% offset account actually works

A mortgage offset account is a transaction account linked to your home loan. The balance sitting in it doesn't change your loan balance on paper, but it reduces the amount your lender actually charges interest on, dollar for dollar, every single day. As ASIC's MoneySmart puts it plainly, if you have a $750,000 home loan and $50,000 in your offset account, you're only charged interest on $700,000. Your repayment stays the same as originally scheduled, so more of each repayment goes toward the principal instead of interest, which means you pay the loan off faster without having to find any extra money.

Most offset accounts are only available on variable-rate home loans. Fixed-rate loans generally don't support a full offset, which is one of several trade-offs worth weighing up in our fixed vs variable vs split home loans guide.

Here's what that looks like on the numbers this calculator uses by default, a $600,000 loan over 30 years at 6.17% (the average owner-occupier variable rate ASIC MoneySmart reported in mid-2026), with $40,000 sitting in offset:

These figures come straight from the calculator above, run your own loan amount, rate and offset balance through it to see your own numbers.

100% offset vs partial offset

A 100% offset account reduces your loan balance dollar for dollar, which is what this calculator assumes. A partial offset account only reduces your loan by a fraction of the offset balance, for example a 40% partial offset on a $40,000 balance would only reduce the amount charged interest by $16,000, not the full $40,000. On our worked example above, that difference is worth roughly $1,523 a year in extra interest. Partial offsets are rare in Australia today but a few older or introductory products still use them, so it's always worth asking your lender the direct question: "Is this a 100% offset account?"

Worked example: interest saved over the life of a loan

The saving compounds the longer the offset balance sits there, because paying down principal faster also shortens the loan itself. Keeping the same $600,000 loan, 30-year term and $40,000 offset balance in place for the whole loan:

That's a bigger number than most people expect from "just" $40,000 sitting in a transaction account, and it's the same maths our how to pay off your mortgage faster guide walks through in more depth. These figures assume the offset balance and repayment stay constant for the life of the loan, which is the same assumption the calculator above makes, in reality a growing offset balance would save even more.

Offset account vs redraw vs extra repayments

All three reduce the interest you pay, but they behave very differently once you need the money back, or if the property ever becomes an investment. We cover the tax side of this in detail in our offset account vs redraw guide, the short version is below:

For property investors, the offset account is often the safer default. Because your savings sit beside the loan rather than inside it, the loan balance (and the interest that's potentially tax-deductible) stays higher, avoiding the mixed-purpose problem that redraw can create if the property is ever rented out.

Who benefits most

An offset account tends to work best for people who consistently keep a meaningful balance in it, people with irregular income like freelancers and business owners who need a genuine buffer, property investors wanting to preserve deductibility, and anyone who wants an emergency fund that also reduces interest in the meantime, effectively earning your mortgage rate, tax-free, instead of sitting idle in a savings account.

It may not be worth it if your balance is consistently low, roughly under $10,000 to $20,000, if the offset-linked loan carries a meaningfully higher rate or fee than a comparable loan without it, or if you're disciplined enough to make extra repayments directly and know you'll never need to access that money again.

Common misconceptions

• "An offset account works the same as extra repayments, my money is locked in." False. Money in an offset account stays in your name in a separate transaction account, fully accessible at any time.
• "Any savings account linked to my home loan is an offset account." Not necessarily. Some lenders offer "linked accounts" that don't actually reduce your loan balance for interest calculation purposes. Always confirm it's a genuine 100% offset account with your lender.
• "My offset account is automatically set up and working." Don't assume it. ASIC's July 2026 review of offset accounts (REP 837), covering 8 major banks and over 70% of the home loan market, found banks paid more than $55 million in compensation for offset account failures between September 2023 and August 2025. In one case, a bank error removed an offset link in April 2025, and the customer paid over $3,500 in extra interest in just over a month before catching it. ASIC Chair Sarah Court summed it up plainly: "Customers should not have to discover their offset account has not been working as promised." Check your bank's app confirms the account is linked to the right loan.
• "A partial offset account is just as good as 100%." Not even close. On a $40,000 balance, a 40% partial offset only reduces the loan by $16,000, versus the full $40,000 with a 100% offset, a difference of roughly $1,523 a year in interest at 6.17%.
• "Offset accounts are only useful for large balances." Even a modest balance adds up. $20,000 sitting in offset on a $600,000 loan at 6.17% saves roughly $1,270 in the first year alone.

Is an offset account worth it?

Compare the loan with offset against the cheapest comparable loan without it. Work out the rate premium plus any annual fees, then weigh that against the interest saved on the balance you'd typically keep in offset. Say your offset-linked loan carries a 0.15 percentage point rate premium on a $600,000 loan (about $900 a year) plus a $395 annual package fee, a total cost of roughly $1,295 a year.

Run your own loan amount, rate and typical offset balance through the calculator above, then weigh the interest saved against your specific lender's rate premium and fees before deciding.