Offset Account Calculator

An offset account is a transaction account linked to your home loan. The balance is "offset" against your loan balance when the bank calculates interest, so you are charged interest on the difference rather than the full loan. For example, a $500,000 loan with $50,000 in the offset account is charged interest as if the loan were $450,000. Your repayment stays the same, but because less interest is taken out of it, more goes toward paying down the principal — which means the loan is paid off sooner and you pay less interest overall.

Often, yes. Some lenders charge a monthly account-keeping fee of around $10–$25, while others bundle the offset into a "package" with an annual fee of roughly $300–$400 that also includes things like a rate discount or a credit card. Fee-free offset accounts do exist, usually on basic or no-frills loan products. Because fees eat directly into your interest savings, the net savings (interest saved minus fees) is the number that actually matters — not the gross interest saved.

It depends on your interest rate and the fees. A simple rule of thumb: your offset balance needs to be high enough that the interest it saves each year exceeds the annual fees. Mathematically, the break-even balance is roughly annual fees ÷ interest rate. For example, at a 6% p.a. rate with $395 in annual fees, you need about $6,580 in the offset just to break even. Below that, the account costs you money. The calculator above shows your exact break-even point and flags a net loss automatically.

Both reduce the interest you pay, but they work differently. An extra repayment goes straight into the loan and permanently reduces the balance — but withdrawing that money again (a "redraw") is at the lender's discretion and may be restricted. An offset account keeps your money in a separate transaction account that you can spend from freely, while still reducing the interest charged on the loan. Offset gives you flexibility; extra repayments give you a guaranteed lower balance but less access to the cash.

It depends on the lender. Many fixed-rate loans do not offer a 100% offset account, or only offer a partial offset. Some lenders do allow offset on fixed rates, often as part of a package, but it is less common than on variable loans. If you are fixing your rate and want an offset, check the product features carefully before committing — and ask specifically whether it is a 100% offset or a partial offset.

A 100% offset account offsets the full balance against your loan — every dollar in the account reduces the loan balance dollar-for-dollar for interest purposes. A partial offset account only offsets a portion of the balance (for example, only 50%), so $50,000 in a 50% partial offset only reduces your effective loan balance by $25,000. 100% offset accounts are the most common type offered today and deliver the full interest savings modelled in this calculator; partial offsets are rarer and save noticeably less.

Use the "Test My Bank" tool above. Open your latest home loan statement and note the interest charged for the billing period, your loan balance at the start of the period, and your offset account balance. Enter those figures along with your interest rate and the number of days in the billing cycle. The tool calculates the interest your offset should produce — (loan balance minus offset balance) × daily rate × days — and compares it to what your bank actually charged. A small difference is normal because your balance moves during the month, but a large gap may mean your offset isn't being applied correctly and is worth raising with your bank.

An offset is worth it when the interest it saves each year is more than the account's fees. At a 6% p.a. rate with $395 in annual fees, you need about $6,580 in offset just to break even; above that, every extra dollar saves you roughly 6 cents a year. If you usually keep a large balance in your transaction account, an offset can save tens of thousands over the loan — but if your balance is usually small, a fee-free basic loan may be cheaper. The calculator above shows your exact break-even and net savings.

Roughly your offset balance multiplied by your interest rate. $50,000 in offset on a 6% p.a. loan saves about $3,000 a year in interest; $100,000 saves about $6,000. Because your repayment stays the same but less of it is interest, that saving also pays the loan off sooner. Enter your balance and rate above to see the exact yearly and lifetime saving.

On a 6% p.a. loan held to term, you'd need roughly $50,000 sitting in offset for around 16–17 years to save $50,000 in interest — or a higher balance over a shorter time. The calculator above models your actual loan term, rate and balance to give the precise figure, with fees deducted.