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. Redraw may have restrictions on minimum amounts or number of withdrawals, and funds in redraw are technically part of the loan, not your own account.

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.

Does an offset account work with a fixed rate home loan?

Sometimes. Many fixed rate loans do not come with a full offset, and some lenders only offer a partial offset or cap how much the offset can hold while the rate is fixed. A common answer is a split loan: part fixed for certainty, part variable with a full offset for your savings. Which lenders allow what changes often, so it is worth checking before you fix.

Is the money saved in an offset account taxed?

An offset account does not pay you interest, so there is no interest income to declare on it. The benefit is simply less interest charged on your loan. If the loan is for an investment property, how you move money between the offset and the loan can affect the interest you can claim, so talk to your accountant before you set it up. We do not give tax advice.

Free offset account calculator

Home Loan Offset Calculator

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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Offset accounts

See how much an offset can save you

Last updated: November 2026

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.

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.

Your estimate

Interest saved with the offset

$202,175

And the loan is paid off 4 years 8 months sooner.

Total interest, no offset: $695,029
Total interest, with offset: $492,854

With and without the offset

Your loan with and without the offset
Measure	No offset	With offset
Total interest	$695,029	$492,854
Paid off in	30 years	25 years 4 months
Monthly repayment	$3,597	$3,597

That is about $3,084 less interest in the first year alone. Your offset catches up with the loan balance in about 24 years 2 months.

Assumptions

Assumes a 100% offset, principal and interest with the same monthly repayment in both cases, the rate staying the same and no fees. Lenders charge interest daily; this works monthly, so treat it as a close guide.

Figures last checked November 2026.

This is an estimate, not financial advice. Results are a guide only. Speak to a broker for accurate figures based on your situation.

Free, no obligation. Your numbers go with your enquiry.

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Find a loan where the offset actually pays

The calculator shows what an offset could save. Sumit checks whether your current loan has a full offset, what you pay for it, and which lenders would give you the same feature for less. Free, no obligation. We generally respond within an hour.

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Quick answer

What is a home loan offset calculator?

A home loan offset calculator shows how much interest you save by keeping money in an offset account linked to your loan. Interest is worked out on your loan balance minus your offset balance, every day. On a $600,000 loan, $50,000 in a full offset means you pay interest on $550,000.

A full (100%) offset reduces the balance interest is charged on by every dollar you hold: $1 for $1; Source: How a full offset works
Home loan interest is worked out daily and charged monthly, so every day the balance sits there counts: ÷ 365; Source: Daily interest formula
Less interest a day with $50,000 in offset on a $600,000 loan: $8.22; Source: Illustration at 6% p.a., not a rate offer
Interest paid to you on an offset balance: the benefit is the interest you do not pay: $0; Source: How an offset works

Pink piggy bank and coins on a wooden table — Your savings stay yours and stay available. They just work against your loan instead of sitting idle. Photo: Andre Taissin / Unsplash

The basics

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

The maths

How home loan interest is calculated daily

Daily interest with an offset

(loan balance − offset balance) × annual interest rate ÷ 365

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.

One day of interest, illustrated

No offset: $98.63
$50,000 in offset: $90.41
Saved every day: $8.22

$600,000 loan at an illustrative 6% p.a. Not a rate offer; your rate depends on your lender and loan.

For a deeper look at how offset accounts compare to redraw facilities, read our detailed guide on both options.

Check what my offset could save

Worked examples

What different offset balances could save

Three balances on the same $600,000, 30-year principal and interest loan at an illustrative 6% p.a., with the balance held in a full offset the whole time. These illustrate the maths; they are not client figures or a rate offer.

$20,000 in offset

An emergency fund

Three to six months of living costs, parked in the offset instead of a savings account.

Interest saved in year one: about $1,200
Time off the loan: 2 years 1 month
Interest saved overall: about$91,600

$50,000 in offset

Savings plus your pay

The $50,000 used in the FAQ answers above, held steady for the life of the loan.

Interest saved in year one: about $3,000
Time off the loan: 4 years 8 months
Interest saved overall: about$202,200

$100,000 in offset

A large cash buffer

Savings built up over years, or money set aside for a future project.

Interest saved in year one: about $6,000
Time off the loan: 7 years 10 months
Interest saved overall: about$338,700

Offset or redraw

Offset account vs redraw facility: which is better?

Both reduce your interest, but they work differently and suit different borrowers.

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.

Offset: a separate account, instant access, best for your pay and savings
Redraw: extra repayments inside the loan, may have minimums or delays
Fixing your rate? Many fixed loans have no full offset. See fixed rate loans with an offset account

The full comparison, with examples, is in our guide to the offset account vs redraw facility.

Offset and redraw, side by side

Five features compared

Offset account compared with a redraw facility
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

Get more from it

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.

Set up my offset the right way

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How an offset account saves you interestSumit Joshi, RyRo Loan Centre · Sumit, from our Instagram

Splits, offsets and where your pay lands

The structure matters as much as the rate: which split gets the offset, whether part is fixed, and how money moves each payday.

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Rate reviews, restructures and lender switches, in our clients' own words.

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Guru Prasadh
3 years ago on Google
Sumit has been my mortgage broker for over couple of years, and this time he and his team helped me to refinance my loan & they provided best possible advice with regard to rates and assisted in loan restructure as well. The paper work was easy to follow and without hassles. Sumit is always a very approachable person and someone who would be willing to walk the extra mile to provide additional insights. I would highly recommend his services for both new home buyers & investors.
Guru Prasadh
3 years ago on Google
Sumit has been my mortgage broker for over couple of years, and this time he and his team helped me to refinance my loan & they provided best possible advice with regard to rates and assisted in loan restructure as well. The paper work was easy to follow and without hassles. Sumit is always a very approachable person and someone who would be willing to walk the extra mile to provide additional insights. I would highly recommend his services for both new home buyers & investors.
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I have been working with Sumit from last 3 years now and no complaints. He is a trusted advisor who always provides me with worthy information, I trust him as he comes up with best deal in your own interest. Thanks to him and his team, Kathryn for helping me refinance just now, hassle free. Highly recommend.
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I have been working with Sumit from last 3 years now and no complaints. He is a trusted advisor who always provides me with worthy information, I trust him as he comes up with best deal in your own interest. Thanks to him and his team, Kathryn for helping me refinance just now, hassle free. Highly recommend.

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Our Norwest office checks offsets and rates for homeowners from Castle Hill to Kellyville every week. Meet a mortgage broker in the Hills District who will tell you whether your offset is paying its way.

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FAQ

Home loan offset calculator FAQs

How an offset saves interest, what it costs, and how it compares with redraw and fixed rates.

8 answers in 2 topics

How an offset saves you money

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.
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.
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.
An offset account does not pay you interest, so there is no interest income to declare on it. The benefit is simply less interest charged on your loan. If the loan is for an investment property, how you move money between the offset and the loan can affect the interest you can claim, so talk to your accountant before you set it up. We do not give tax advice.ATO guidance on residential rental properties

Choosing an offset loan

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.
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. Redraw may have restrictions on minimum amounts or number of withdrawals, and funds in redraw are technically part of the loan, not your own account.Offset account vs redraw facility: the full guide
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.
Sometimes. Many fixed rate loans do not come with a full offset, and some lenders only offer a partial offset or cap how much the offset can hold while the rate is fixed. A common answer is a split loan: part fixed for certainty, part variable with a full offset for your savings. Which lenders allow what changes often, so it is worth checking before you fix.Can you have an offset account on a fixed rate loan?

What to do next

Related guides

An offset is one of the levers that shortens the term. 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 and the team look at your loan, your offset and what you keep in it, then compare offset home loans across the lenders we work with. 5.0 stars from 360+ Google reviews and 2,500+ clients helped. We generally respond within an hour.

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