Home Loan OffsetCalculator
See how much interest you can save using an offset account. Discover how your savings can reduce your loan term and total interest payments.
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See how much an offset can save you
An offset account links your savings to your home loan so the balance offsets the amount on which interest is calculated. That can cut interest and help you pay off the loan faster. This calculator shows the potential savings and how your loan term can shorten when you keep savings in an offset.
Not all loans offer full offset; features and rates vary by lender and product. For a comparison of offset products and whether one suits your situation, use the form at the top of this page for a free strategy call.
Last updated: April 2026
Home Loan Offset Calculator
Discover how much you can save with a home loan offset account. See how your savings can reduce your loan term and total interest payments significantly.
How does a home loan offset account work?
An offset account is a transaction account linked to your home loan. Instead of earning (taxable) interest in a savings account, your money sits in the offset and directly reduces the loan balance that interest is calculated on. The mechanics are simple: if your loan balance is $600,000 and you have $50,000 in the offset, you only pay interest on $550,000.
Interest on a home loan is calculated daily on the outstanding balance. This means the offset delivers its saving every single day your money is sitting there — not just at the end of the month. Having your salary deposited directly into the offset on payday maximises the time your balance is at its highest each month, squeezing more interest saving out of every dollar.
- Every dollar in offset reduces the daily interest charge on your loan
- Your money remains accessible — offset funds are not locked in
- No tax on the interest "earned" — the saving comes from reduced interest, not from earning interest
- Works best with consistent, high balances — salary, savings, emergency fund
How home loan interest is calculated daily
Home loan interest is typically calculated on a daily basis and charged monthly. The daily interest calculation is: (loan balance − offset balance) × annual interest rate ÷ 365. This is why the timing of deposits matters — a salary paid on the 1st of the month reduces the interest-charging balance for every day of that month until funds are spent.
On a $600,000 loan at 6%, the daily interest charge without any offset is approximately $98.63. With $50,000 consistently in the offset, it drops to approximately $90.41 — a daily saving of $8.22 or about $3,000 per year. Over 30 years, if you maintain a growing offset balance, the cumulative saving can exceed $100,000 and cut years off your loan term.
For a deeper look at how offset accounts compare to redraw facilities, read our detailed guide on both options.
Offset account vs redraw facility: which is better?
Both reduce your interest, but they work differently and suit different borrowers.
| Feature | Offset Account | Redraw Facility |
|---|---|---|
| How it works | Separate account; balance reduces interest-bearing amount | Extra repayments reduce loan balance; redrawn when needed |
| Access to funds | Instant, like a transaction account | May have delays, minimums, or approval required |
| Tax implications | No tax on interest saved | No tax on interest saved |
| Best for | Day-to-day banking, salary parking, flexibility | Disciplined savers who rarely need to access funds |
| Availability | Usually on variable-rate loans; some lenders charge extra | More widely available, including some fixed-rate loans |
For most borrowers who want flexibility and plan to use the account as a primary transaction account, a full offset is the superior choice. For borrowers who want a lower rate and are happy to park extra repayments they rarely touch, a redraw can be a cost-effective alternative. A free strategy call can help you decide which structure suits your situation.
How to make the most of a mortgage offset account
An offset works best when you keep money in it consistently. Some practical ways to maximise your offset include:
- Having your salary paid directly into the offset account
- Keeping your emergency fund and short-term savings in offset rather than a standard account
- Aligning your repayment frequency with your pay cycle to keep the offset balance higher for longer
- Reviewing your loan regularly to ensure the offset and rate still suit your goals
We can help you compare offset home loans from different lenders and design a simple money flow that uses your offset account to reduce interest while keeping your day-to-day banking easy.
Home loan offset calculator FAQs
How does an offset account save me money on my home loan?
An offset account reduces the balance on which interest is calculated daily. If you have a $600,000 loan and $50,000 in offset, you only pay interest on $550,000. At 6%, that saves approximately $3,000 per year in interest. Because interest accrues daily, any day your offset balance is higher saves you more money — which is why having your salary paid into the offset is such an effective strategy.
How much does $50,000 in an offset account save me?
On a $600,000 loan at 6%, keeping $50,000 in a 100% offset account saves approximately $3,000 per year in interest. Over a 30-year loan term, that consistent offset balance could save over $60,000 in total interest and cut several years off your loan. The exact saving depends on your loan balance, interest rate and how consistently you maintain the offset balance.
Is an offset account worth paying a higher fee or rate for?
It depends on how much you keep in the offset. If you consistently maintain a large offset balance (e.g. $50,000+), the interest saving typically outweighs a modest rate premium or annual fee. If your offset balance is small and irregular, a lower-rate loan without offset may cost less overall. A mortgage broker can run the numbers for your situation across multiple lenders to find the best value.
What is the difference between a full offset and partial offset account?
A full (100%) offset account reduces your loan balance dollar-for-dollar — every dollar in the offset directly reduces the balance on which interest is charged. A partial offset account only offsets a percentage of the balance in the account. Full offset accounts are far more common and effective. Some lenders offer multiple offset accounts linked to a single loan, which can be useful for budgeting.
Is a redraw facility the same as an offset account?
No. A redraw facility lets you access extra repayments you've already made on your loan. An offset account is a separate transaction account linked to your loan. Both reduce the interest you pay, but an offset is more flexible for day-to-day banking — funds are accessible without approval or delays.
Do all home loans have an offset account?
No. Offset accounts are a feature offered on some but not all home loans, and typically on variable-rate products. Some lenders charge a higher rate or fee for offset functionality. We compare offset home loan options across 50+ lenders — book a free strategy call to find the best offset product for your situation.
Got questions or need help? Book a free call with us.
What to do next
Compare repayments or explore our Home Loans overview and detailed Refinancing guide to see how an offset account can fit into your overall loan strategy.
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Sumit
Director & Senior Loan Specialist
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Asset Finance Specialist
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Settlement & Client Liaison