Free offset account calculator. See how your offset balance reduces the interest charged on your home loan. Compare total interest with and without an offset account, calculate your effective interest rate, and see how many years you could shave off your mortgage.
Interest Saved / Year
$0
Tax-free equivalent savings
Time Saved on Loan
0 months
Faster mortgage payoff
Effective Rate
0.00%
Total Interest Saved
$0
Over the life of the loan
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An offset account is one of the most powerful tools for reducing your mortgage costs. It works by reducing the loan balance that interest is calculated on. Every dollar sitting in your offset account is effectively "earning" you the same rate as your mortgage — tax-free.
With a 100% offset account, interest is only charged on the loan balance minus the offset balance:
Interest charged = (Loan balance − Offset balance) × Interest rate
So the first-year interest saving is approximately your Offset balance × Interest rate. The lifetime saving is larger, because keeping your repayment unchanged sends that saved interest to principal each month, which compounds over the loan term.
Take a $600,000 home loan at 6.19% p.a. over 30 years, with $50,000 held in a 100% offset account. Interest is charged on $600,000 − $50,000 = $550,000. In the first year that is roughly $34,045 with the offset versus about $37,140 without it — a saving of around $3,095 in the first year(which is $50,000 × 6.19%). Because the calculator keeps your repayment the same, the saved interest pays down extra principal every month, so the lifetime interest saved runs to tens of thousands of dollars and trims years off the loan term.
The real power of an offset account comes from compounding. When you reduce the interest charged each month, more of your regular repayment goes toward principal. This means next month, even less interest is charged, and even more goes to principal. Over 30 years, this snowball effect can save you hundreds of thousands of dollars and years off your loan.
Both offset balances and extra repayments reduce interest. The key advantage of offset is flexibility — your money stays liquid and accessible. Extra repayments may be subject to redraw restrictions or fees. For investment properties, offset is generally preferred as it preserves the tax-deductibility of the full loan amount while still reducing interest costs.
An offset account is a transaction account linked to your home loan. The balance in the offset reduces the loan amount that interest is calculated on. For example, if you have a $500,000 loan and $50,000 in your offset, you only pay interest on $450,000. Your money remains accessible — it's not locked into the loan.
A 100% offset account means every dollar in the account directly reduces your interest. At a 6% interest rate, $50,000 in an offset saves you $3,000/year in interest — tax-free. This is equivalent to earning 6% on a savings account before tax (or around 8-9% gross for higher earners). It's almost always worth the slightly higher loan rate.
An offset account is a separate transaction account — your money stays liquid and accessible. Redraw means making extra repayments on the loan itself, which you can later withdraw. The key difference: offset funds are always yours; redraw funds are technically the lender's until you request them. Some lenders restrict redraw access.
Some lenders allow multiple offset accounts linked to one loan, which can help with budgeting (e.g., separate accounts for bills, savings, everyday spending). However, not all lenders offer this feature, and some charge extra for additional offset accounts. Check your loan terms.
Interest saved through an offset account is not considered taxable income — you're reducing interest charged, not earning interest. This makes offset accounts more tax-effective than savings accounts, especially for higher-income earners. For investment loans, keeping funds in offset rather than paying down the loan preserves your tax deduction.
Interest is charged on your loan balance minus your offset balance. To estimate the first-year saving, multiply your offset balance by your interest rate: a $50,000 offset at 6.19% saves about $3,095 in the first year. Over the full loan term the saving compounds, because keeping your repayment the same sends the saved interest to the principal — so the total interest saved and the years shaved off are larger than the first-year figure suggests.
Sources & methodology
This calculator applies your offset balance against the interest-bearing portion of the loan amount you enter, then models monthly principal-and-interest repayments at your stated interest rate and term to derive interest saved per year, lifetime interest saved, time saved, and your effective rate. It uses the loan figures you provide rather than any fixed tax-year rates. Figures are computed in your browser and nothing you enter is stored or sent to a server.
Authoritative sources
Reviewed by Bishal Shrestha — Founder of OneBookPlus, 10+ years building tools with Australian tax-agent and BAS-agent practices. Last reviewed and updated: May 2026.
Disclaimer: This calculator produces estimates only and is not tax advice. Tax outcomes depend on your individual circumstances. For decisions that affect your tax position, consult a registered tax agent or the ATO directly.
OneBookPlus handles invoicing, GST tracking, BAS prep, and ATO lodgement automatically.
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