Mortgage Offset Calculator

An offset account is one of the most powerful and most underused features of a modern home loan. It is an everyday transaction account linked to your mortgage, and every dollar sitting in it is 'offset' against your loan balance for the purpose of calculating interest. Park $30,000 in the offset against a $600,000 loan, and you are only charged interest on $570,000, while your money stays fully accessible.

The appeal is that offset savings are effectively tax-free. Interest earned in a savings account is taxable income, but interest you avoid paying on your home loan is not. For a taxpayer on a high marginal rate, the after-tax benefit of money in an offset can comfortably beat the after-tax return on a standard savings account paying the same headline rate.

Because home loan interest is calculated daily and charged monthly, even short-term balances help. Having your salary land in the offset and running day-to-day spending from a linked credit card, paid off in full each month, keeps the maximum balance offsetting for the maximum number of days. Over a full loan term, that everyday discipline can shave years off the loan and save a meaningful sum in interest.

It is worth distinguishing a true offset from a redraw facility. A 100% offset is a separate account whose balance simply reduces the interest calculation, leaving your funds liquid. Redraw lets you pull back extra repayments you have already made, but the money has legally been paid into the loan and can be subject to lender conditions. For flexibility, a genuine offset usually wins, though it sometimes comes with a slightly higher rate or an annual package fee, which is exactly the trade-off worth modelling.

Our calculator lets you enter your loan, rate and a typical offset balance to estimate the interest saved and time cut from your loan. The numbers are indicative and assume a steady balance. To weigh an offset product against a lower-rate loan without one, use our full calculator and talk to a Greystone broker, who can tell you whether the offset benefit outweighs any package fee for your situation.