How to use the mortgage offset calculator
- Enter your loan amount, interest rate, term, repayment frequency and loan start date.
- Enter the balance you will keep in your offset account at the start.
- Enter the net amount the offset balance changes by each month: savings added minus spending. Use a negative number if it falls.
- Compare interest, payoff date and the balance chart with and without the offset.
Worked example
$600,000 loan at 6.00% over 30 years, $40,000 in offset growing by $500 a month
With a loan start date of 1 October 2026 and monthly repayments of $3,597.30, total interest without an offset is $696,694.24. With the offset it falls to $385,372.08, saving $311,322.16, and the loan is repaid on 1 August 2049 instead of 1 November 2056, about 7 years 3 months sooner. First-year interest falls from $35,799.22 to $33,164.30. If the $40,000 stayed constant, the saving would be $168,932.66.
How it works
The loan is simulated day by day. Each day interest accrues on max(0, loan balance − offset balance) × rate ÷ 365. Accrued interest is added to the loan on each monthly anniversary of the start date, and your repayments are deducted on their due dates (monthly, or every 14 or 7 days). The offset balance changes by your monthly amount on each monthly anniversary and never falls below zero. The repayment is the same with and without the offset, so the saving shows up as lower interest and an earlier payoff date.
Assumptions
- A 100% offset account: every dollar in it offsets a dollar of the loan. Partial offset accounts save less.
- The interest rate stays constant. Variable rates change over time.
- Interest is calculated daily on a 365-day year and charged monthly, a common Australian lender practice.
- Your monthly net change to the offset is an estimate you supply and is held constant.
Frequently asked questions
Is an offset account the same as paying down the loan?
For interest, a constant offset balance saves exactly as much as borrowing that much less, because interest is charged on the loan minus the offset. The difference is that the money stays in your account, so you can use it. A growing offset balance saves more over time than the starting balance alone.
Why is the offset not just subtracted from the loan?
Because the offset balance changes over time and the loan balance falls with every repayment. The calculator models both day by day, so deposits, withdrawals and repayments are all reflected when they happen.
Do my repayments go down with an offset?
Usually not. Your scheduled repayment stays the same, but less of it goes to interest and more to principal, so the loan is repaid sooner.
Do offset savings get taxed?
Interest you avoid is not income, so there is generally no tax on the saving, unlike interest earned in a savings account. Check your own situation with a tax adviser, especially if the property is or may become an investment.
Limitations
- Offset accounts often come with higher rates or package fees; compare the total cost with a loan without an offset.
- Does not model rate changes, fees or redraw.
- Your lender may calculate interest slightly differently (for example on a different day basis).