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Offset savings, what your cash buffer shaves off
An offset account holds your cash against the loan balance for interest calculation only. The bigger your average offset, the more interest you skip, and the faster you're done.
Years
Your typical balance held in the offset across the year
Interest saved
$164,612
vs. paying the loan with no offset
Time saved
3y 6m
Loan paid off 42 months early
Total interest, no offset
$736,442
Total interest, with offset
$571,831
How offset works
An offset account is a transaction account linked to your home loan. The balance is netted against the loan balance for interest calc, so $40,000 sitting in offset on a $650,000 loan means interest is charged on $610,000 only.
Your minimum repayment doesn’t change. But because more of each payment now goes to principal, the loan is paid off faster, and you save tens of thousands in interest over 30 years.
The catch: offset accounts are usually only available on the package or premium variant of a loan, with a higher rate or annual fee. The break-even depends on your average balance, for some borrowers a basic loan with extra repayments works out cheaper.
Want a real number, not a ballpark?
These figures are estimates. A 30-min broker consult will run your specific scenario against the actual lender policies, no fees, no obligation.
Important: This calculator provides an estimate only and does not constitute credit advice. Actual rates, repayments, fees and approval are subject to lender policy and your individual circumstances. Comparison rates are based on a $150,000 loan over 25 years on a secured basis, see footer for the full disclaimer.
How much does an offset account save?
An offset account saves the interest on whatever balance you keep in it. As a guide, $50,000 held in offset against a $600,000 loan at 6% p.a. saves roughly $3,000 a year, and because your scheduled repayment does not change, that saving is redirected to principal and can take years off the loan.
Is an offset worth a higher rate or annual fee?
Only if your offset balance is large enough. Offset accounts usually come inside a package with a $200 to $400 annual fee, or on a variable rate a touch higher than a basic loan. The break-even is roughly $10,000 to $20,000 of offset balance: above that, the interest saved beats the extra cost; below it, a lower-rate basic loan wins. If you hold little spare cash, compare the sharpest basic rates against the offset loans before deciding.
Offset vs redraw: which should I use?
The interest saving is identical for an owner-occupier. Offset wins on access (it is an everyday account with a card) and, importantly, on tax for investors: money in an offset does not reduce your deductible loan balance, so pulling it out later does not touch your interest deductibility, whereas redrawing does. For an investment loan, keep spare cash in offset, not redraw.
Offset account questions, answered
How does an offset account work?
An offset is a transaction account linked to your home loan. The balance is deducted from the loan principal before daily interest is calculated, so $50,000 sitting in offset against a $500,000 loan means you pay interest as if you owed $450,000.
How much does an offset account save?
It saves the interest on whatever sits in the account. As a guide, $50,000 held in offset against a $600,000 loan at 6% saves about $3,000 a year in interest, and because your repayment stays the same, that saving goes straight to principal and can cut years off the loan. The more you hold and the longer you hold it, the more it saves.
Is an offset better than redraw?
For most owner-occupiers, the interest saving is the same. Offset wins on liquidity (debit-card access) and on tax treatment for investors, money in offset doesn't reduce the deductible loan balance, so future withdrawals don't taint deductibility.
Are offset accounts free?
Usually they're bundled into a package with a $200 to $400 annual fee, or attached to a slightly higher-rate variable loan. The break-even is normally around $10,000 to $20,000 of offset balance; below that, the fee outweighs the interest saving.
Can I have multiple offsets?
Some lenders offer multi-offset (for example CommBank, Macquarie, ME), letting you split balances across savings goals while still offsetting the same loan. Others limit you to one. Multi-offset doesn't increase the saving, it's about budgeting.
Next: compare offset home loans, see the effect of extra repayments, or check the cheapest rates overall.