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Offset account calculator

Money in a full offset account is not charged interest on the loan, while remaining money you can withdraw. This estimates what that is worth.

The saving is the loan rate applied to the offset balance, and it compounds — because interest not charged is balance not carried, every period after that.

Offset account calculator

Estimates what holding a balance in a full offset account saves in interest, and how much sooner the loan closes if repayments stay the same.

The amount borrowed.

Nominal annual rate. Interest is charged each period on the balance owing.

Years remaining over which the loan is repaid.

A fortnight is two weeks, so a year holds 26 of them.

Average balance held in the linked offset account. Modelled as constant.

Interest saved

$116,869.47

Time saved
3 years 2 months
Repayment
$3,062.34
Interest without offset
$602,444.16
Interest with offset
$485,574.69
New payoff time
26 years 10 months
Payments saved
38

Betaoffset v1.0.0

Estimate only, for general information. It models a full offset account with a constant balance; real balances move with income and spending. It excludes fees, charges and lender-specific product rules, is not financial advice, and is not an indication that any lender will approve a loan.

What to enter

  • Offset balance

    The amount held in the offset account. Treated as constant for the life of the loan, which is the simplification worth understanding before relying on the figure.

Reading the result

The interest saved is what the offset earns you. Compare it against a savings account: an offset against a 6% loan is equivalent to a savings account paying 6% with no tax on the earnings, because a cost avoided is not income.

That tax point is the reason offsets are worth more than their headline rate to anyone paying tax on interest. A savings account paying 6% to someone on the 37% marginal rate keeps 3.78%; the offset keeps the whole 6%.

The loan also finishes earlier, because the scheduled repayment stays the same and more of it goes to principal.

Worked examples

Every figure below is computed by the same calculator on this page, from the inputs described. Nothing here is typed in by hand, so an example cannot disagree with the tool.

$50,000 offset against a $650,000 loan at 6.0%

Interest saved
$205,250
Time saved
4y 4m
Repayment
$3,897

The interest saved over the loan is many times the balance held, and the money was never spent — it stayed available the entire time.

A $20,000 emergency fund, held in offset

Interest saved
$92,282
Time saved
1y 11m
Repayment
$3,897

The case for keeping a cash buffer in an offset rather than a savings account. Same accessibility, materially better return, and no tax on the benefit.

How it is worked out

Interest each period is charged on the loan balance less the offset balance, rather than on the loan balance alone. The scheduled repayment is unchanged, so the difference goes to principal.

The comparison is the same loan with no offset. The difference between the two totals is the saving.

This models a full offset — every dollar offsets a dollar. A partial offset credits only a proportion, and this will overstate the benefit for one.

How every calculator on this site is built

What it assumes

  • The balance stays put

    A real offset balance moves with your salary and spending. A constant balance is a reasonable model of an average one and an optimistic model of a fluctuating one.

  • The offset is full, not partial

    Full offset is the common Australian product. A partial offset credits a fraction of the balance and saves proportionately less.

  • The account fee is not deducted

    Offset accounts usually sit inside a package with an annual fee. On a small offset balance that fee can exceed the interest saved, which is worth checking before opening one.

Where it stops being right

  • Package fees are not included

    Compare the annual fee against the interest saved on your actual balance. Below roughly the fee divided by the rate, the offset costs more than it returns.

  • It is not tax advice

    The comparison with a savings account above describes how interest is generally treated. Your own position depends on your marginal rate and circumstances.

All home loans and repayments calculators

Putting this calculator on your own site

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